Due to analyst downgrades, Ambarella's (NASDAQ:AMBA) share price tumbled last week and the stock is now priced at a discount. The company appears poised for significant growth both this year and beyond. 

Ambarella is a semi-conductor company that builds a range of HD video camera systems-on-a-chip that are currently used in multiple lines of wearable cameras, sports cameras, and video devices running the Android operating system, as well as IP surveillance cameras and automobile dash cams.  

The future of HD video technology

Source: Ambarella

A9 system-on-chip devices, revealed in 2013 at CES and being deployed in 2014, will take advantage of new 4Kp30 HD technology that will likely become the standard encoding for consumer HD video. We will soon see this technology in smartphones, still cameras, and consumer-grade video cameras.

Source: Ambarella

Released last week, the new MotorVu 360 is a "4-channel automotive camera solution," according to the official press release. This new product provides four independent cameras mounted on the car, typically on side mirrors, the dash, and rear. The system will have technology for advanced driver assistance systems and wireless connectivity. Anticipated applications for the MotorVu 360 include law enforcement, passenger buses, and the passenger car market, where backup cameras and driver-assist technologies are fast becoming standard.  

Major clients
Notable current partnerships and opportunities for Ambarella are collaborations with Google (NASDAQ:GOOGL) and GoPro. With Google, it is creating a wearable pendant-style video recording device while instructing others on Google Helpouts. The devices, unveiled at CES 2014, are built on the A7 platform and feature Wi-Fi streaming direct to the cloud, eliminating the need for device storage, and sporting very little latency.

GoPro's Hero line of wearable and mountable HD video cameras have doubled sales for eight straight years, and sold 2.3 million units in 2012. Following that pace, 4.5 million units will likely be sold in 2013, but the pace of sales could also quicken as popularity snowballs. Expect a huge GoPro presence during the Sochi Winter Olympics, scheduled to begin next month. It wouldn't be surprising if the company put in a bid for a Super Bowl ad. GoPro could see an imminent IPO at this rate of success.

Why you should buy today
Ambarella is a high-growth Silicon Valley upstart, with a conservatism rarely seen in those circles. It has zero debt and $128 million in cash, yet grew earnings 29% over the trailing 12 months. Assuming 20% growth over the next five years, which seems conservative in light of rumored new products and high-profile partnerships, the current price of $28.80 is below fair value of around $31.04 on current EPS, using a simple Graham intrinsic value calculation with 20% long-term earnings growth.

There appears to be a high upside and limited downside for Ambarella. If you believe in this company and its prospects, take a hard look and buy once the stock sheds a few pounds, as it has recently.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.