NEW YORK (TheStreet) -- It would be a gross understatement to say that shares of Ambarella (AMBA), a semiconductor processing solutions specialist, has done well in 2015. With AMBA stock up 77% on the year to date, compared to flat gains for the S&P 500, "annihilation" would be the better description. But how much more gains can AMBA deliver?
Ahead of Ambarella's fiscal first-quarter earnings results due out Tuesday after the close, that's an important question current investors must ask. Taking profits now seems like a smart move. And for new investors thinking about placing a long bet here on AMBA? Forget about it.
Don't confuse "caution" for "bearishness." This is not to suggest the Santa Clara, Calif.-based company is broken or on the verge of collapse. But at 45 times trailing earnings, AMBA is expensive, compared with a P/E of 21 for the S&P 500 index. Likewise, when paired with the iShares Philadelphia Semiconductor Index (SOXX), which has an average P/E of 23, the premium AMBA stock carries stands out even more. And the SOXX is home to such semiconductor giants as Qualcomm (QCOM) (P/E of 16) and Intel (INTC) (P/E of 14).
By comparison, shares of both Qualcomm and Intel are down in 2015 by 5.5% and 5%, respectively. For AMBA shareholders, why not play it safe and lock in some gains now. Consider, with fears about a market correction around the corner, it would make more sense to own the underperformers, like QCOM and INTC, which both pay annual dividends that yield 2.70%, compared with no dividend for AMBA.