Table of Contents
Key Points
- Ambarella’s plunge presents a buying opportunity for investors.
- Institutions and analysts are optimistic about Ambarella’s future.
- Ambarella is expected to return to growth in the next fiscal year.
- There are alternative stocks that investors may also consider.
Ambarella’s stock (NASDAQ: AMBA) experienced a 20% drop after the Q2 report and guidance were released. However, this should not be interpreted as a sign of bearishness. The company focuses on next-gen computer vision technology, which is currently in its early stages and has low revenue levels. Additionally, Ambarella’s stock is thinly traded, making it more susceptible to negative news.
The recent market headwinds have created an opportunity for investors to take advantage of a long-term investment that is expected to provide solid returns in the coming years. Here’s why:
Ambarella Plays a Fundamental Role in Computer Vision and AI
Computer vision is a rapidly growing field, and its importance will continue to increase as artificial intelligence (AI) develops further. Ambarella is at the forefront of this industry, leveraging its expertise in imaging and image processing to advance computer vision technology at the edge of computing. With applications ranging from facial recognition and security to autonomous vehicles and consumer products like drones, the computer vision industry is projected to reach a value of approximately $14 billion by 2022, with a forecasted compound annual growth rate (CAGR) of 20% for the next 7 years. The widespread use of the Internet of Things (IoT) and technological advancements will contribute to its accelerated growth.
Ambarella Faces Temporary Challenges Due to Industry Normalization
While Ambarella had a mixed quarter, the reported results weren’t dire enough to warrant a 20% decline in stock price. The company experienced weakness in its end markets, which was compounded by industry normalization. However, Ambarella’s inventory management is efficient, and the company’s balance sheet remains strong. Despite downward revisions in targets for this year by analysts, Ambarella analysts anticipate 28% top-line growth, which is expected to drive the stock higher in the long run.
Analysts and Institutions Show Confidence in Ambarella’s Future
Despite the adjustments in stock price targets, analysts remain bullish on Ambarella. The consensus rating from 19 analysts tracked by Marketbeat.com is a Moderate Buy, with a price target approximately 40% above the current stock price. Although there have been some recent revisions below the consensus target, even the lowest target is still higher than the current price, indicating a potential rebound in the future.
Institutions also demonstrate their confidence in Ambarella’s prospects by continuing to hold the majority of the stock and buying at a higher rate compared to sellers. Their buying activity aligns with previous market bottoms and is expected to hold true following the recent price decline.
Technical Analysis Suggests a Range-Bound Market
After the 20% drop, Ambarella’s stock showed resistance at the 150-day moving average but did not reach the bottom of the trading range. Support was observed at the session’s low, indicating a range-bound market that is likely to persist in the next quarter. This presents an opportunity for investors, as the stock’s price is favorable at the bottom of the range, and Ambarella is positioned for growth and long-term success.
Before making any decisions about Ambarella, it is important to consider all available information.
