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Why Ambarella Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Ambarella (NASDAQ: AMBA  ) surged by more than 15% during Friday's intra-day trading, before giving back some of those gains, and closing up 8.6% after the video and image processing semiconductor specialist reported solid second-quarter 2013 earnings results.

So what: Helped by a strong performance from its IP security camera business, second-quarter revenue rose 35% year over year, to $37.7 million, which translated to GAAP net income of $0.21 per share, and adjusted net income of $0.26 per share. For reference, analysts on average were expecting adjusted earnings of just $0.19 per share on sales of $35.99 million.

Now what: Ambarella CEO Fermi Wang stated during the company's earnings conference call:

In the second quarter, we saw sales growth in our security business across all regions. But in particular we experienced significant positive momentum from our business in China. This was driven both by professional high-definition IP camera as well as consumer camera designed for home monitoring use.

In addition, Wang stated that the company's wearable sports and automotive camera markets continue to grow, and they're looking forward to continuing the positive momentum next quarter, as well. As a result, and with the stock trading at just 15 times next year's earnings estimates, it's a safe bet that today's optimism should have little trouble carrying forward.

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Related Tickers

9/28/2016 2:42 PM
AMBA $68.31 Down -0.33 -0.48%
Ambarella CAPS Rating: *****