One Reason Ambarella (AMBA) Stock Is Down Today

NEW YORK (TheStreet) -- Shares of Ambarella (AMBA) were falling 5.5% to $48.32 Thursday following analyst comments about the chipmaker's customer GoPro (GPRO) .

After talking to the CEO of action camera maker iON Cameras, a major competitor for GoPro, Citi analyst Jeremy David wrote a cautious note about GoPro. David noted that iON expanded from 150 stores in 2013 to 6,000 this holiday season, and is on track to be in 10,000 stores in 2015.

"Our discussions with the CEO of iON leave us incrementally more cautious on GoPro with 2015 revenue growth of 22% in our model potentially at risk given a likely slowdown in the category post the HERO4 launch and increased competition which could put pressure on ASP/mix," David wrote.

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GoPro uses Ambarella chips for video compression and image processing. Shares of both companies were down following the note.

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

"We rate AMBARELLA INC (AMBA) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. 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, notable return on equity, impressive record of earnings per share growth and compelling growth in net income. 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 analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 18.7%. Since the same quarter one year prior, revenues rose by 42.8%. Growth in the company's revenue appears to have helped boost 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 5.34, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Semiconductors & Semiconductor Equipment industry and the overall market, AMBARELLA INC's return on equity exceeds that of both the industry average and the S&P 500.
  • AMBARELLA INC reported significant earnings per share improvement 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 100.8% when compared to the same quarter one year prior, rising from $9.13 million to $18.33 million.
  • You can view the full analysis from the report here: AMBA Ratings Report

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