NEW YORK (TheStreet) -- Shares of Ambarella Inc (AMBA) were tumbling, down 19.08% to $96.58 on heavy volume in afternoon trading Monday, following a research report released by short-seller Citron Research last Friday.
The firm called Ambarella's share price "ridiculous," issuing a 12-month price target of $60 per share and the 18-month target of $40 per share.
Ambarella's "parabolic frenzy has now launched it into a realm that can't possibly be supported by reality," Citron wrote in a report.
In addition, the firm criticized Ambarella's valuation, noting the company faces serious commoditization risks and is lacking in the innovation department, according to The Wall Street Journal.
About 18.53 million shares of Ambarella have changed hands as of 1:47 p.m. ET today, compared to its average trading volume of about 3.49 million shares a day.
Santa Clara, Calif.-based Ambarella is a developer of semiconductor processing solutions for video that enable high-definition, video capture, sharing, and display.
The company's system-on-a-chip designs HD video processing, image processing, audio processing, and system functions onto a single chip, delivering video and image.
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 a few notable 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, expanding profit margins and good cash flow from operations. We feel its 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:
- AMBA's very impressive revenue growth greatly exceeded the industry average of 0.7%. Since the same quarter one year prior, revenues leaped by 73.5%. 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 5.85, which clearly demonstrates the ability to cover short-term cash needs.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. 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 two years. We feel that this trend should continue. During the past fiscal year, AMBARELLA INC increased its bottom line by earning $1.56 versus $0.85 in the prior year. This year, the market expects an improvement in earnings ($3.10 versus $1.56).
- 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 258.4% when compared to the same quarter one year prior, rising from $5.26 million to $18.85 million.
- You can view the full analysis from the report here: AMBA Ratings Report