Why Ambarella (AMBA) Stock Is Up After-Hours Tuesday

NEW YORK (TheStreet) -- Ambarella (AMBA) was gaining 1.2% to $24.95 in after-hours trading Tuesday after beating analysts' estimates for earnings and revenue in the first quarter.

For the first quarter Ambarella reported EPS of 25 cents a share, beating the Capital IQ Consensus Estimate of 21 cents a share by 4 cents. The chipmaker reported revenue of $40.92 million for the quarter, an increase of 20.6% from the year-ago period. Analysts expected revenue of $40 million for the quarter.

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TheStreet Ratings team rates AMBARELLA INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMBARELLA INC (AMBA) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and notable return on equity. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 26.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • AMBA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 6.39, which clearly demonstrates the ability to cover short-term cash needs.
  • The gross profit margin for AMBARELLA INC is rather high; currently it is at 64.73%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 13.84% trails the industry average.
  • Powered by its strong earnings growth of 38.46% and other important driving factors, this stock has surged by 63.16% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • You can view the full analysis from the report here: AMBA Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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