) is a semiconductor company that makes the chips that allow
cameras to capture high definintion video. Analysts have started to
get better clarity into the earnings outlook for the company and
have increased their estimates. Today, its the this Zacks Rank #2
(Buy) stock is the Bull of the Day.
Recent trading action has also made this stock incredibly
attractive. After touching $16.00 on April 1, this stock has seen a
significant consolidation. Giving back another 10% on April 3 makes
the current level that much more attractive to investors.
Ambarella (AMBA) went public to very limited fanfare in October of
2012. Originally priced between $9 -$11 per share, the investment
bankers moved the price to $6 even though they only sold 6 million
shares. The stock opened at $6.71 so it was an instant 10%+ success
for those who participated.
Those who sold soon there after didn't see the bigger picture. With
the stock trading around $15, its up about 150% from the IPO price.
Ambarella manufactures and sells semiconductors for high definition
and high resolution cameras. It addresses three primary markets,
the wearable camera segement; the auto segment and finall the IP
Security segment. Their chips come with software that allows for
encoding of content and easy upload to sites like YouTube. A camera
that uses an Ambarella chip basically replaces an entire board and
thus requires 50% less power.
AMBA Beats Estimates In Most Recent Quarter
Having only reported two times, the company is sitting with a 50%
positive surprise ratio. The first earnings report was a miss, as
the company earned $0.21 per share, about 19% less than what the
two analyst consensus posted at the time. The revenue came in $2
million above the estiamte and Wall Street liked what it heard, as
the stock traded higher by 5.2% in the following session.
The next quarter was a different story. Expectations were talked
down to a profit of $0.06 and then the company posted $0.13 per
share we had a 116% positive earnings surprise. The three analyst
estimate for revenue of $29 million was light by 8% as well. Wall
Street responded by sending shares higher by more than 17% the next
Big Picture Events
There have been two events that have woken people up to the idea of
high resolution / high definition video cameras. The first was the
Russian meteor that was caputred by dozens of dashboard cameras and
give a real feel of what it was like to be present at that event.
The second was the introduction of Google Glass.
Google Glass is a product that carries a ja dropping $1500 price
tage and has a tiny camera embedded into a pair of glasses. Through
voice commands a user can take a picture, record a video or jump
into a Google Hangout (multi person video sharing event). The idea
was pretty far out there when launched, but there has since been
several stories in the main stream media about the glasses.
The Russian meteor was captured on numerous dashboard cameras. Many
of them used the AMBA chip to produce among the highest quality of
video. Dashboard cameras are certainly popular in Russia and in
Asia, but the idea of them coming to the United States shouldn't
suprirse anyone. The obvious use will be for insurance companies
that want to quickly and cost effeciently settle accident claims.
Jury's, I am told, love video evidence.
AMBA Sees Estimates Moving Higher
Estimates for AZZ have risen recently. The Zacks Consensus Estimate
for 2013 for AMBA stood at $0.57 in January 2013 but has since
inched higher to $0.60.
The 2014 Zacks Consensus Estimate for AMBA is currently at $0.84.
That implies earnings growth of 40%. Earnings growth like that
would normall carry a sky high valuation as well, but AMBA is very
Seeing that the company has only reported two quarters, it's hard
to look at the valuation given the limited data. At present the
company is trading at 24x trailing twelve months earnings, which is
slightly higher than the 18x industry average. Both of those
multiples remain the same for the forward PE. The price to book
multiple of 3.4x is higher than the 2x industry average, but the
expected growth of revenue will help bring that number lower.
This stock has only been trading for a few months, so a price and
consensus chart doesn't make much sense here. What investors should
see is that the stock held that $6 IPO pice (even though the
intra-day low was $5.55) and has been off to the races ever since.
As more cameras use the AMBA chip, this chart will continue on its
"near picuture perfect" 45 degree angle.
Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor
in charge of the
Run Investor service
, a Buy and Hold service where he recommends the stocks in the
Brian is also the editor of
a trading service that tracks institutional money flows and looks
for great stock picks from that data.
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AMBARELLA INC (AMBA): Free Stock Analysis
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