Why Ambarella Inc. Shares Jumped

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  )  jumped 10% Tuesday after analysts at Stifel reiterated their "buy" rating on the stock, simultaneously raising its price target to $34 per share from $27.

So what: To justify its call, Stifel pointed to meetings with management last week, which led them to believe Ambarella is "expanding its video technology lead while expanding/creating new addressable markets." 

To be sure, even if Ambarella's solid position in the security and sports camera spaces weren't enough -- remember revenue and net income last quarter jumped year-over-year by 24% and 35%, respectively -- the company also recently unveiled intentions to press into the emerging wearables industry with a new pendant camera platform designed in a partnership with Google.

Now what: It's also worth noting that shares of Ambarella had already fallen for each of the past four trading days following a last week's downgrade from Needham, which argued that the stock looked overvalued after a 45% run-up over the previous month.

But considering Ambarella stock is currently trading at almost exactly the same levels at which I expressed optimism last week, I'm going to have to side with Stifel. Ambarella's video tech has a solid head start in a several massive addressable markets and so should still be able to handsomely reward patient investors over the long term.

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Read/Post Comments (3) | Recommend This Article (8)

Comments from our Foolish Readers

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  • Report this Comment On January 14, 2014, at 6:22 PM, pedrokoz wrote:

    Back again today to pump an obviously over-values stock. I strongly disagree and with a target price of $34 one would need to be crazy to risk the downside. Are you here to play a rich bet for 5%. As someone who was in this since the public offering I believe you missed the boat.

    You need to gain a little knowledge of this industry. GEOS Semi is the leader in this field and there is little chance they will be displaced in the auto market by these over-riced chips.

  • Report this Comment On January 15, 2014, at 2:24 PM, Liana wrote:

    Padro, my humble opinion is that it was foolishly well established the path and prospects of AMBA by the Motley Fool. The question is if you resources that establish GEOS Semi as leader are equally capable. Need more info on this. I found the educated guesses of MF reliable enough. Of course we are only humans and I found no other source equally reliable. The bottom line is what does it mean leader in the industry and according to what source? We are a family of foolish mathematicians and need accuracy.

  • Report this Comment On January 16, 2014, at 2:12 PM, murraymurray wrote:

    Pedro.. I think there is more to think about here than just the Goldman one sheeters from which you are clearly getting your info from about this name. While you are completely correct that GEOS holds much of this market space, with MANY big clients, AMBA represents the long tail here. Their clients include GoPro and Google, who no doubt will grow this name over the coming years with HUGE opportunity for growth in the space -- While GEOS growth will be dictated by "Curved LEDs" and the SLOW growth of the big name clients they operate with. Seeking Alpha has a few very good articles about this name which I think can shed more light on the future of AMBA.

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