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Ambarella, Inc. (AMBA) Trade Card™

Ambarella, Inc. (AMBA)
50.61 2.09 (4.31%)
Sector: Information Technology
Published by Capital Market Laboratories on 2018-04-20

What does this rating mean?
STOCK RETURNS
3Mo: -1.5%   |   6Mo: -4.2%  |   12Mo: -4.1%

TECHNICAL RATING
10DMA: $49.1  |  50DMA: $49.9  |  200DMA: $52.0
What does this rating mean?

Fundamentals     

➜ AMBA generates $1.0201 in revenue for every $1 in expense, which is below the sector average of $1.06 but still yields an operating profit.

➜ AMBA generates $418,000 in revenue per employee which is above the sector average of $377,000.

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Ambarella (AMBA) is one of the most interesting and perhaps still one of the most contentious stories in all of financial markets. The company is a maker of high-definition video chipset and compression software which means it spans all of technology from AAPL and GOOGL to TSLA, INTC, QCOM and NVDA. It does have a "secret sauce" by taking its own algorithms for action cameras and security cameras and then taking the software to turn it into products on silicon in the most power-optimized way.

The company leans heavily on GoPro (GPRO) as a customer (30% of its revenue). The stock is down nearly 50% since an open battle began between Citron Research and Jim Cramer. At the same time, revenue is up 65% year-over-year while operating margins, earnings and free cash flow are all at all-time highs. Here's a chart of AMBA's revenue (TTM) over time.



Citron research called the company grossly overvalued noting that AMBA had a price to sales ratio of nearly 15 to 1, while the semi-conductor industry averages 2.5 to 1. With the stock now down 42% in the last six-months, AMBA's price to sales sits at 6 to 1.

On the other hand, Jim Cramer believes AMBA has massive room to grow beyond GPRO because of drones. "People are underestimating drones. Ambarella is the brains behind drones," Cramer said on CNBC back in June. Citron on the other hand responded by saying that "the brains behind drones" is factually wrong. "It would be as foolish as saying the camera is the brains that controls the iPhone." Citron points to Intel (INTC), QUALCOMM (QCOM) and NVIDIA (NVDA) as the powerful developers behind the brains of drones.

Motley Fool Founder David Gardner has taken a strong bullish stance and wrote:



"High-definition camera software developer Ambarella is the market leader in wearable sports cameras, dashboard cams, and IP security cameras. Existing markets have huge potential, and new areas such as 4K video offer ample opportunity. Ambarella invests heavily in R&D and has a strong lead on its competitors." (Source: Fool.com).


AMBA has also found itself in the (possibly) lucrative automobile OEM business. Garmin announced that its all-in-one dashboard camera for cars utilizes Ambarella's A7LA camera in order to continuously record and save files on accident impact, providing secure footage of when and where accidents happen. It also integrates full collision warning and lane departure warning driver assistance (Source: Best Stocks for 2015: Ambarella Takes the Lead).

Along those same lines, Pacific Crest's Brad Erickson said:




"[W]e believe the highly strategic Vislab acquisition has accelerated Ambarella's effort to become a viable competitor in advanced driver assistance systems (ADAS) for automakers over the much longer term. (Source: Barron's).


By addressing ADAS, AMBA could be in position to benefit from one of the biggest secular growth drivers in automotive going forward and puts it squarely in the segment that will be grown by Apple (AAPL), Google (GOOG) and Tesla (TSLA).

Although we find ourselves in an aging bull market where thousands of companies are making new highs in revenue, AMBA's revenue (TTM) is down from a year ago ($310 million), and from two-years ago ($316 million). Revenue in the most recent year was $295 million.

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Technicals   |   Support: 44.41   |   Resistance: 52.1   

Swing Death Cross Alert: The short-term 10 day MA is now below the 50 day MA.

AMBA has a three bull (stock is range bound) technical rating because its trading above its 10- and 50-day moving averages, but below its 200- day moving average. The stock is up on the day but the 10-day MA is below the 50 day MA ("swing death cross").


Earnings Estimates
Earnings Date
2018-03-01
EPS
$0.08
Revenue (Mean)
$
Revenue (Median)
$
Last Quarter (Actual)
$71 million


Fundamentals Rating Summary


Metric Current 1yr Ago 2yr Ago Direction
Revenue (TTM US$ Millions)Falling 295 310 316 Falling

Operating Margin (QTR)Falling 1.02 1.30 1.15 Falling

Net Income (TTM US$ Millions)Falling 19 58 77 Falling

Levered Free Cash Flow (TTM US$ Millions)Falling 18 57 82 Falling

Research and Development (US$ Millions)
Rising
32 27 23
Rising

Research and Development Expense/RevenueRising 0.447 0.310 0.345 Rising




Stock Returns and Chart


AMBA is down -1.5% over the last three months and down -4.2% over the last six months. The stock has returned -4.1% over the last year.

Before we dig into the fundamental trends that drive the rating, let's look at a two-year stock chart with regression channel and 10-day momentum (on the bottom).

Note: You can change time horizons by clicking the or buttons near the bottom of the chart. You can examine a one minute day trading chart by clicking the at the top left corner of the chart.

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Now let's examine the visualizations of the critical financial measures.


Enter Symbol


METRIC CURRENT 1YR AGO 2YR AGO DIRECTION
Revenue (TTM US$ Millions) 295310316Falling

Revenue over the trailing twelve months (TTM) for AMBA is falling. For the most recent (annual) period the company reported $295 million from $310 million a year ago, or a -4.8% change. The two-year change in revenue (TTM) is $-21 million (a -6.6% change).

What do all these numbers mean?
AMBA's fundamental rating was hit hard by these results:
1. The one-year change was negative.
2. The two-year change was negative.

Let's look at Revenue (TTM US$ Millions) in the chart below.


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Enter Symbol



METRIC CURRENT 1YR AGO 2YR AGO DIRECTION
Operating Revenues/Operating Expense 1.021.301.15Falling

Operating Revenues/Operating Expense
Operating revenue over operating expense simply shows us how much revenue (in dollars) is generated for every dollar of expense. The ratio must be (at a minimum) above 1.0 in order for a company to turn an operating profit. For the latest quarter AMBA showed a ratio of 1.02.

What do all these numbers mean?
A year ago Operating Revenues/Operating Expense was 1.30. In the last year we can see operating margins are decreasing but are greater than 1.0 for the most recent period.

AMBA's fundamental rating was affected from the operating margin numbers in two ways:
1. The current value is above 1.0 (the firm generates an operating profit).
2. The one-year change was negative (lowers the rating a little bit).

Let's look at Operating Revenues/Operating Expense in the chart below with the total assets in the orange line.


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Revenue per Employee


Before we turn to earnings and cash flow analysis, let's look at a different view of revenue on a scatter plot with peers for some perspective.

On the x-axis we equal space the companies and on the y-axis we plot revenue per employee (TTM) in $millions. For this chart, the upper right hand corner is "best" and the lower left hand corner is "worst." The company with the top revenue per employee is marked in green.

AMBA 's value is $418,000 million per employee (find it on the y-axis).



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METRIC CURRENT 1YR AGO 2YR AGO DIRECTION
Net Income (TTM US$ Millions) 195877Falling

Net Income (after tax profit) over the trailing twelve months (TTM) for AMBA is falling. For the most recent trailing-twelve-months (TTM) the company reported net income of $19 (million). That's a decrease in the most recent year from $58 (million) or a -67.39% change and a decrease from two-years ago of -75.36%.

In our next chart we plot Net Income (TTM US$ Millions) in the blue bars and the quarterly results in the gold line. Note the falling bars from a year ago (four quarters ago).


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METRIC CURRENT 1YR AGO 2YR AGO DIRECTION
Levered Free Cash Flow (TTM US$ Millions) 185782Falling

Levered Free Cash Flow (TTM US$ Millions) is a critical determinant of stock price since market cap is the present value of all future free cash flows. For AMBA the metric is falling (it was $57 million last year). For the most recent trailing-twelve-months the company reported Levered Free Cash Flow (TTM US$ Millions) of $18 million. That's a decrease in the most recent year from $57 million or a -67.78% drop.

This cash metric is down $-63 million from $82 million two-years ago.

For our next chart we plot Levered Free Cash Flow (TTM US$ Millions) in the blue bars through time. Note the falling bars from a year ago (four quarters ago).


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METRIC CURRENT 1YR AGO 2YR AGO DIRECTION
Research and Development (US$ Millions) 322723
Rising

Research and Development (US$ Millions) in the most recent quarter for AMBA was $32 million. R&D is rising (16.38%) from last year's value of $27 million. Further, we can see that R&D today relative to two-years ago is increasing (34.69%) from $23 million.

R&D per dollar of revenue for the latest quarter is $0.447. Last year this measure was $0.310 (it's falling).

In our final time series chart we plot Research and Development (US$ Millions) in the blue bars. Note the rising bars from one-year ago.


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