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AMBA Stock: Chip Maker’s Accelerating Momentum Following Earnings

Stock MarketsSep 13, 2021 01:00PM ET
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© Reuters. AMBA Stock: Chip Maker’s Accelerating Momentum Following Earnings

Ambarella (NASDAQ:AMBA) is a semiconductor company focusing on low-power, high-definition, and ultra-HD video compressions.

The company’s concentration on AI and HD chips is what makes it popular among its peers. These chips are increasingly used for deep neural network processing around the world. Also, secular catalysts provide strong support via a growing market. This makes AMBA stock an ideal choice for many investors, and I'm bullish on this stock.

Indeed, this AI-focused chip maker remains a great pick for long-term growth investors. Ambarella has seen impressive growth of late, spurred by increased demand for AI-posed chips.

This has been reflected in the recent price action of this stock. AMBA stock soared by 25% on September 1. This happened after the company delivered an impressive quarterly report. (See AMBA stock charts on TipRanks)

Let's take a look at whether or not AMBA stock is a suitable investment in this environment.

Ambarella’s AI-Based Computer Vision Bearing Fruit

As mentioned, Ambarella issued better-than-expected Q2 results. In its report, the firm stated that it earned $0.35 per share, on revenues of $79.3 million during the second quarter. These numbers came in well ahead of analyst expectations of $0.25 per share in earnings, on $75.8 million in sales.

However, another factor investors have jumped on with this earnings report was the company's forward-looking projections. Looking ahead to Q3, the company projects $90 million in revenue.

AMBA’S Business Transformation

Ambarella started as a manufacturer of video-processing chips for action cameras. But as time passed, the business expanded. The firm now describes itself as an AI-vision silicon company. 

Currently, many individuals use Ambarella’s products in computer and human vision apps. These include electronic mirrors, autonomous driving technologies, drive recorders, and robotic applications.

Sure, sector-wide challenges still exist. That said, Ambaralla expects FY22 to represent a major inflection point for the company's business. 

Ambarella Discovers Growth in Unpredicted Areas

The significant move from traditional video processing to computer vision is still continuing. As the company transitions toward higher-end technologies, investors are expecting margin expansion and more profitability.

Additionally, growing market share makes Ambarella a stock to watch. The company's market share is growing in a number of unexpected markets, including fleet management.

Analysts attribute some of this growth to supply chain constraints. While it's true that Ambarella may simply be the right company in the right place at the right time, it's still gobbling up market share. That's a great thing for long-term investors bullish on Ambarella's core markets.

Wall Street's Take

TipRanks' analysts rating consensus considers AMBA stock to be a Moderate Buy. Out of 12 analyst ratings, there are eight Buy recommendations, and four Hold recommendations.

The average AMBA price target is $145.91. This figure lies between a low of $115 per share, and a high of $180 per share.

Bottom Line

Investors keen on growth have increasingly gravitated toward AMBA stock of late. Indeed, this is a stock with tremendous momentum right now.

Of course, things could turn around. This company operates in a growth segment that has been juiced by supply chain constraints and increased near-term demand. Projecting this out over the long-term could be dangerous.

However, the catalysts underpinning AMBA stock appear strong. This is a stock that's certainly worthy of a look by growth investors today.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

AMBA Stock: Chip Maker’s Accelerating Momentum Following Earnings
 

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