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Bull of the Day: Ambarella Inc


Ambarella Inc. (NASDAQ: AMBA) has seen its estimates increase due to higher than expected new product sales, specifically the GoPro Hero4 sports camera.  Further, new opportunities in drones and wearable cameras along with a solid foothold in professional IP cameras in China are the short and long term growth drivers for this company.  Therefore Ambarella is our Zacks Bull of the Day.

This Zacks Rank #1 (Strong Buy) develops video compression and image processing semiconductors.  The company’s products are used in digital still cameras, digital camcorders, and video-enabled mobile phones.  Ambarella sells its solutions to original design manufacturers and original equipment manufacturers.  

Ambarella recently reported their Q3 2015 earnings in early December, and posted their seventh consecutive positive Earnings and Revenue surprise.  The company beat the Zacks Consensus Earnings and Revenue estimates by 29.55%, and 5.4% respectively.  Over the past four quarters Ambarella has posted an average positive earnings surprise of 44.15%.  

Increasing Estimates

The table below shows Price and EPS estimates and for Ambarella.

Over the past 30 days estimates have increased for Q4 15, FY 15, Q1 16, and FY 16; Q4 15 has increased from $0.26 to $0.39, FY 15 rose from $1.16 to $1.41, Q1 16 climbed from $0.28 to $0.36, and FY 16 increased from $1.49 to $1.62.  These numbers reflect the positive traction of Ambarella’s new product sales, and IP camera sales.  

Post Positive Earnings Surprises

The table below shows the impact each positive earnings surprise had on the overall price level.  

With the strong earnings numbers and increased guidance, Ambarella has a proven track record of price appreciation after earnings.  

Company Data

Management recently increased their guidance from Zacks previous revenue guidance of $52 million to a range of $57-$60 million for Q4 15.  Also, Ambarella has been able to control infrastructure costs, trimming it from 13% of total revenue a year ago to 4% currently.  Further, Non-GAAP gross margins of 63.4% was above expectations of 61%.  This was due to their strong product mix.  

Bottom Line

Ambarella has positioned itself as a premier developer of video compression and image processing semiconductors.  Further, the company has a proven track record of solid earnings and revenue growth over the past two years.  Their new product mix, and the success of the GoPro Hero 4 have Ambarella poised for solid growth over the next month.   

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