Is Ambarella a God Investment?

PHOTO CREDIT: Ambarella

OVERVIEW

Ambarella Incorporation is a company based in the United States. The company designs, manufactures, and sells semiconductor products, like various different types of SoC’s (System on Chips) for cameras. Some of Ambarella’s products can be found inside action cameras, body cameras, HD cameras, and many others. The company was founded in 2004.

Why You Should?

  1. Stocks in the semiconductor industry have seen their prices shoot up over the past couple of months due to investor confidence in the sector. Ambarella has also seen its stock price shoot up a great deal. If this investor confidence continues, it will benefit Ambarella’s stock price which will benefit its investor base.
  2. Ambarella makes system on chips for a wide variety of products. The company supplies chips to companies like Axon, an enterprise that makes police body cameras for departments in the United States. This will benefit the company as they will have a good revenue source from these large companies.
  3. Ambarella makes a wide variety of system on chips which can be found in many products. It designs chips that can be found in everything from regular HD cameras to Axon police body cameras and Snapchat’s spectacle glasses. This wide variety of products will benefit the company and its investor base.

Why You Should Not?

  1. Though Ambarella still supplies some large customers, the company has lost many customers in the past. For example, the company lost business from GoPro, the widely known action camera company, DJI Innovations, a widely known drone camera company, and Google. This was the start of lackluster results from the company, something which I'll talk about later.
  2. Ambarella faces tough competition from large and small semiconductor companies. Some of these companies include Qualcomm, a company that has taken business away from Ambarella in the past. This tough competition has hurt the company in the past and might continue to do so in the future. This will also hurt investors in the company.
  3. In my opinion, I think that there are better semiconductor stocks to invest in than Amberella. Some of these companies include Qualcomm, Broadcom, Nvidia, and many others. These companies all have solid customer bases and supply some of the largest companies in the world, like Apple and Samsung.
  4. Over the past couple of financial years, the company has reported extremely lackluster financial results. Revenues and profits have been falling ever since the company lost the business of large customers like Google, GoPro, and Google. These falling metrics will hurt the company and its investor base in the future. In the financial year of 2019, the company reported revenues of around 228 million and a loss of around 45 million. In the financial year of 2018, the company reported slightly lower revenues at around 227 million but a significantly lower loss at around 30 million.
PHOTO CREDIT: Yahoo Finance

MY OPINION

In my opinion, I think that there are better semiconductor stocks to invest in than Ambarella. This is because of tough competition which has caused Ambarella to lose some large customers and lackluster financial results in the past. However, a wide variety of products, investor confidence in the sector, and a somewhat solid customer base might help the company recover.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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