GoPro IPO and Google's Nest & Dropcam Deal Leave Ambarella Sitting Pretty

Source:GoPro.

Ambarella (NASDAQ: AMBA  ) seems to be hanging around the cool kids these days. Its two biggest clients -- wearable camera leader GoPro and surveillance camera speedster Dropcam -- are in the news right now, and Ambarella stands to be the welcome beneficiary in both cases.

Over the weekend we learned that Google's (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) recently acquired Nest has hatched a buyout of its own. The company behind the high-tech learning thermostats is confirming the purchase of Dropcam that third party sources price as a $555 million deal.

Later this week we should have GoPro making its stock market debut. The shares are expected to price between $21 and $24 after Wednesday's market close and begin trading shortly after Thursday's trading session begins.

Both of these events should pay off nicely for Ambarella which is the provider of video compression and image processing semiconductors for GoPro and Dropcam products. GoPro's IPO should help increase awareness in its high-def wearable cameras that are popular with outdoor enthusiasts and video bloggers. Consumer-facing companies often see a bump in popularity after a prolific IPO. It even happened to Google.

As for Dropcam, having Google as a parent -- or grandparent -- company will clearly help expand the global possibilities for the trendy surveillance cams that play along nicely with smartphone apps to stream video. An acquisition sometimes opens the door to a potential supplier shift, but that's highly unlikely here. Late last year Google struck a deal with Ambarella to help power its Helpouts platform for video support. In other words, Google has already vetted Ambarella's video chips.

Ambarella is on a roll. It may not seem cheap at 25 times this fiscal year's profit forecast and 20 times next year's target, but it's growing quickly. History has also proven those estimates to be conservative as Ambarella has surpassed expectations by 19% or better over the past year. Analyst estimates also have yet to include the favorable impact that Google's ownership of Dropcam should have on sales. 

Along the way Ambarella will serve as a reasonably priced way to play GoPro's likely hot IPO, and diversification if the wearable camera maker slips or if growth slows. It will have Google doing the grunt work for its prospects to grow through Helpouts and Dropcam, and that's a good workhorse to have in your corner. Ambarella is in the right place at the right time -- at the right price.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Read/Post Comments (0) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3004198, ~/Articles/ArticleHandler.aspx, 9/16/2014 4:06:31 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement