Why Ambarella Inc. Shares Jumped

Is Ambarella's rise meaningful? Or just another movement?

Jan 14, 2014 at 5:43PM

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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Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Ambarella and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

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Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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