GoPro's IPO Will Drive Ambarella's Prospectshttp://www.fool.com/investing/general/2014/02/11/gopros-ipo-will-drive-ambarellas-prospects.aspx Josh Allwine
February 11, 2014
GoPro announced in a press release on Feb. 7 that it plans to file with the SEC for a confidential IPO. GoPro is the world's best-selling camera, selling 2.3 million units in 2012 and raking in more than $500 million during that stretch. It is projected to have doubled that revenue in 2013, although we do not have the figures yet.
The technology behind the GoPro Hero line of action cameras is provided by Ambarella (NASDAQ: AMBA), the leading HD camera system-on-chip, or SoC, manufacturer. Expectations to double that $521 million 2012 revenue have contributed to a big run-up of Ambarella's shares in 2013.
The elephant in the room
At the moment, Google Glass has a video processor SoC built by Texas Instruments (NASDAQ: TXN), so Google may be heating up the competition here by offering the Helpouts opportunity to Ambarella. Since it is clear that Ambarella can produce SoCs at scale to sell 3 million-5 million GoPros currently, it should be able to ramp up a new product line for Google as well. We should keep an eye on any developments here.
Although shares have fallen off their highs in the past month, an imminent GoPro IPO should put another arrow in the quiver for team Ambarella's bullish case heading into 2014.
Valuing the GoPro portion of Ambarella's product lineup
Ambarella does not break out specific sales figures for each of its product divisions, so it is tough to get a handle on what GoPro will do for the company's growth, particularly once an IPO gives GoPro a load of cash with which to drive new product innovation and marketing. Ambarella did $149 million in revenue over the past 12 months. Not knowing the cost of an A7 or A9 SoC makes it tough to imagine what 7 million GoPros will do to the bottom line, but it is a big positive to have major growth in the Americas and Europe, which have historically accounted for a much smaller proportion of revenue than Asia.
March 6 earnings
What to look for on the call: