"With AMBA shares up 65% YTD in 2014, vs. 30.3% for the SOX Index and 15.1% for the NASDAQ Composite, we note the company now trades at one of the richest valuations in our coverage universe," Needham said about the California-based semiconductor processing solutions company, which specializes in HD video capture, sharing and display.
Analysts cited several factors that they believe may cause AMBA to underperform its peers in 2015, including a rapid deceleration in year-to-year revenue growth during the year, management expectations that gross margin will compress in C2H15, and pricing pressure from its largest customer, GoPro (GPRO) .
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Separately, 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 multiple 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, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations. 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.
- 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 ($1.79 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.
- Net operating cash flow has significantly increased by 142.54% to $16.95 million when compared to the same quarter last year. In addition, AMBARELLA INC has also vastly surpassed the industry average cash flow growth rate of 11.95%.
- You can view the full analysis from the report here: AMBA Ratings Report