Please ensure Javascript is enabled for purposes of website accessibility

Why Ambarella Stock Jumped This Week

By Demitri Kalogeropoulos – Dec 10, 2021 at 9:34AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors are becoming more bullish about the computer vision market.

What happened

Ambarella (AMBA 0.72%) shareholders beat the market this week as the stock jumped as high as 11% through Thursday trading before settling to a 7% increase.

The push put the semiconductor chip tech specialist at a return of over 120% so far in 2021 and was powered by rising optimism about its business.

A young man riding in a self-driving car.

Image source: Getty Images.

So what

Ambarella attracted a head-turning upgrade from a Wall Street investing firm earlier in the week. Sales growth expectations are rising for the company, whose products power computer vision, artificial intelligence, and driver assistance cameras.

Shares were also pushed higher on news that Intel is spinning off Mobileye, its autonomous driving platform, into public markets. The move highlights growing demand in the space, and likely expanding valuations for its key players.

Now what

Ambarella laid the foundation for this week's stock price move by announcing strong third-quarter results a week earlier. Sales jumped 64% in the period that ended in late October, management said on Nov. 30, and profitability expanded.

CEO Fermi Wang and his team expressed optimism about its Q4 sales and earnings outlook despite continued supply challenges on key manufacturing components. That bullish forecast echoed the bright forecasts that larger peers such as Nvidia have issued in recent weeks.

Ambarella's smaller selling niche makes it more vulnerable to competition than huge players like Nvidia. However, the markets it serves, particularly electronics manufacturers in need of computer vision solutions, are growing quickly enough to support many winners in the space. As a result, Ambarella shares might move higher if the tech stock continues delivering value to these customers.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns and recommends Intel and Nvidia. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.