The Ambarella Story
Ambarella, Inc. (NASDAQ: AMBA) is a leading developer of low-power, high-definition (HD) and Ultra HD video compression and image processing solutions. The company’s products are used in a variety of professional and consumer applications including security IP-cameras, wearable cameras, drone cameras and automotive video processing solutions. Ambarella compression chips are also used in broadcasting TV programs worldwide.
• H1 introduced, an Ultra HD 4Kp60 H.264/AVC and 4Kp30 H.265/HEVC
flying camera SoC
• A12W introduced, a 28-nm wearable camera SoC
• A12S and A9SE are introduced, 28-nm SoCs for flying cameras
• The S3L family is announced: H.265/HEVC and H.264/AVC 28-nm SoCs
targeting professional and consumer IP camera applications
• Ambarella acquires VisLab, a European developer of computer vision and intelligent automotive control systems
• H2 introduced, a 14nm Ultra HD 4Kp120 H.264/AVC and 4Kp60 HEVC sports and flying camera SoC
• S3L introduced, a 4K Ultra HD SoC family supporting H.265/HEVC and H.264/AVC encoding targeting IP security cameras
• S5 introduced, a 14nm Ultra HD SoC capable of 4Kp60 H.264/AVC and 4Kp60 H.265/HEVC targeting professional IP camera applications
• H22 introduced, a 14nm Ultra HD 4Kp60 SoC supporting both H.265/HEVC and H.264/AVC targeting flying cameras and consumer applications
• A9AQ introduced, Ambarella’s first automotive-qualified SoC targeting video recorders, surround view and electronic mirror applications
• B6 introduced, a high performance, serializer/deserializer companion chip for automotive OEM solutions
• H3 introduced, a 14nm 8Kp30 SoC supporting both H.264/AVC and H.265/HEVC encoding formats targeting the virtual reality and flying camera markets
• S5L introduced, a 14nm 4K SoC for professional, consumer and battery-powered IP security cameras
The JXM Filtration
Today we take a look at $AMBA and how it compares to it’s peers. The specific names for this focus group are shown below on the technology input page. This is where we compare financial and technical ratios against a stock’s direct, industry, and sector competitors using the JXM 24.
The JXM 24 analyzes 5880 ratio (4680 core and 1200 growth) and 1042 actual calculations.
First up is level 1 which has a sole focus on fundamentals. While AMBA is the company spotlight today, the fundamentals are just about average in this group with a final rank of 11. Below shows the sort from strength to weakness. To reiterate what this level does, it utilizes 42 ratios (x 24 companies) pulled largely from a stock’s annual report. This classic analysis focuses primarily on profitability, growth, valuation, and management effectiveness. The ratios are weighed based on importance and organized into 6 scores; Basic, Average, Target, Category, Industry, and Sector.
- The Basic Score compares the ratios of each stock directly against the 24 in the pool.
- The Average Score compares the each company against a predetermined average.
- The Target Score focuses on a JXM set range or value.
- The Category Score is based on a select JXM formula that pools related ratios.
- The Industry Score compares each stock ratio against its industry average.
- The Sector Score compares each stock ratio against the overall sector average.
So while $AMBA isn’t a gem with fundamentals, our focus is strength in numbers and not necessary something that strives in one particular category or level.
The next phase has a primary focus on technicals which are ratios derived from price. AMBA does much better in level 2 taking home a rank of 6 with a momentum index score of hot. We will later focus on the price chart but for now we know that it’s trend is strong against its peers (top 25th percentile)
Now lets review the Summary page which is all the levels (Fundamental, Technical, Valuation, Guru, Rules, Classic Growth and New Growth).
$AMBA gets the 5th rank which is our overall rank for this run of 24. While it’s not the best of the group, it has some interesting aspects. First, it hasn’t been a top scorer since 2015 so watching a company gain strength again is something we like to look for.
Some of its strengths are technicals (will discuss more at the end), Rules (proprietory blend; not shown) and Classic Growth (small sample shown below)
This run has a classic growth average of 13% and $AMBA scores 30% so its well above average.
It also carries an average valuation score of the 24 names being compared but tech is one of those sectors where valuation can run hot. The Fair value calc shows that the longer term margin of safety has +32% upside and while the fair value ranges are negative, its based off average EPS of diluted TTM and next year. Using only next years reading of $2.55, the valuation gets even better
Now that we like what we see with $AMBA its time to review the charts.
First up is the monthly view where price finally broke out of this ascending triangle. In 2016 it found support off the 2013 highs of $36.49.
The second chart is the weekly view and price is trading within a bearish bat harmonic.
The AB bounce off the XA leg down stopped just about the 50% retracement while the BC move dropped within the 88.6% retracement of the AB leg move which eventually created its first higher low. Now that price has moved over B (which was $60.68) price has made a higher high of the higher low. The bat has a target of $71-$72 which is the CD leg. The final CD leg can achieve an 88.6% retracement of the XA leg and also represent a 161.8% to 261.8% extension of the BC leg
The last chart is the daily which shows the new higher high over $60.68, then a nice shakeout followed by nice demand and eventually another high over last weeks high.
$AMBA is exactly the stock the JXM looks for. Strength in numbers while not doing anything really bad. It also succeeds really well in specific areas that have strong correlation to positive price movement. While we held a long position here already in 2017, we are currently looking to buy the retest of 60-61 if possible for a move into $70+