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1 Autonomous Driving Stock Investors Should Know

By Demitri Kalogeropoulos – Jan 11, 2022 at 10:30PM

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You might want to own this small company that designs video capturing and processing tech.

The autonomous driving space has investors excited about the potential for many years of strong sales growth. In this video from "The Virtual Opportunities Show" recorded on Jan. 4, Fool contributor Demitri Kalogeropoulos puts the spotlight on a smaller company in this space, Ambarella (AMBA 1.24%), which seems likely to benefit from strong demand trends over the next few years. 

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Demitri Kalogeropoulos: Sure. The company I want to highlight is called Ambarella and the ticker is AMBA. This is a smaller stock, it's about a seven billion dollar company just worth putting on your radar though, as you mentioned earlier, as we were talking about autonomous driving earlier in the show. This is a company that designs system on a chip platforms and they're basically aimed in that space. Computer vision is what they call it. You can think any of their products that needs to process video highly efficiently and with low power, basically in a mobile setting. These are things like autonomous driving obviously, security cameras are a huge sector of theirs. Drones used to be really popular a couple of years ago, not so much now, but still that's the space you want to think about. Ambarella has a lot of intellectual property, very valuable property. A lot of great engineers working on this. They got the computer vision space a few years ago. Now they're on their fourth or fifth generation of computer vision platform.

Their core platform that pairs AI with the Internet of Things basically is what they're moving toward. I think is a really great space with a lot of good growth markets I think. Sales have been booming lately. The revenue was up 64 percent in the third quarter and the company raised its outlook for the full 2021 year. Profitability is there, margin is there creeping up past 20 percent lately. That's always nice to see, impressive to see in this industry. They just gotten to the acquisition space. We're talking about deploying some cash. They bought a company called Oculii which is helping them apply their own tech into radar vision basically. That's going to be a small growth avenue for them.

But still I like that they're branching out and looking for ways to use some of the clusters to bulk up their portfolio. But the main bullish thesis for them is going to be that their manufacturers keep finding value in these chip technologies that they're creating. As demand for video processing sores over the next few years, it's clearly going to be rising in the autonomous driving world and in the security camera division. But what's really exciting is that we can make good predictions that probably demand for this technology is going to be really high. There are much bigger companies competing in this space too. But it's clear from Ambarella's growing customer portfolio that they've got some good technology and stuff. They can maintain that IP lead. This company could be really good for investors over the next few years.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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