Ambarella (AMBA) Is Today's Water-Logged And Getting Wetter Stock

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.

Trade-Ideas LLC identified Ambarella ( AMBA) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Ambarella as such a stock due to the following factors:

  • AMBA has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $85.1 million.
  • AMBA has traded 521,672 shares today.
  • AMBA traded in a range 202.6% of the normal price range with a price range of $4.81.
  • AMBA traded below its daily resistance level (quality: 6 days, meaning that the stock is crossing a resistance level set by the last 6 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on AMBA:

Ambarella, Inc. develops semiconductor processing solutions for video that enable high-definition (HD) video capture, sharing, and display worldwide. AMBA has a PE ratio of 58.4. Currently there are 4 analysts that rate Ambarella a buy, no analysts rate it a sell, and 3 rate it a hold.

The average volume for Ambarella has been 2.1 million shares per day over the past 30 days. Ambarella has a market cap of $1.6 billion and is part of the technology sector and electronics industry. The stock has a beta of 1.99 and a short float of 26.5% with 4.20 days to cover. Shares are up 61.9% year-to-date as of the close of trading on Wednesday.

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

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Ambarella as a buy. 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, impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value.

Highlights from the ratings report include:
  • AMBA's revenue growth has slightly outpaced the industry average of 18.6%. Since the same quarter one year prior, revenues rose by 24.6%. 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 5.98, which clearly demonstrates the ability to cover short-term cash needs.
  • AMBARELLA INC has improved earnings per share by 38.1% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. During the past fiscal year, AMBARELLA INC increased its bottom line by earning $0.85 versus $0.39 in the prior year. This year, the market expects an improvement in earnings ($1.50 versus $0.85).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 48.9% when compared to the same quarter one year prior, rising from $6.25 million to $9.31 million.
  • The gross profit margin for AMBARELLA INC is rather high; currently it is at 65.71%. 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 19.82% trails the industry average.

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

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