Ambarella: Best in Breed in 4K
08/02/2016 7:00 am EST
This premier designer and maker of video applications and semiconductor chips its a great turnaround opportunity in a company that is in a sweet spot of a hot sector, asserts Dr. Joe Duarte in the industry-leading Breakthrough Tech Profits.
Ambarella (AMBA) makes low-power 4K system-on-a-chip processors that can record and store images in a flash, and at four times (hence the 4K) the resolution of high-definition video.
Those chips allow cars (self-driving and otherwise), drones and other electronics to recognize objects and make decisions based on the stored information.
Ironically, the company that lets devices see so well was blindsided when GoPro (GPRO), which was responsible for a third of Ambarella’s revenue at one time, hit the skids.
Then a major supplier for Ambarella —Sony (SNE) —shut down its main factory in April after an earthquake hit Japan. Ambarella’s stock fell from $125 in July of last year.
But while Ambarella took a hit in both sales and profits, it’s coming back with a vengeance. Its chips are used in products expected to grow briskly, including drones, sports cameras, mobile phones, home security and cloud-based cameras.
Long term, the growth in 4K is expected to continue at a robust pace until 2025, as the technology is starting to emerge from film projection and extend into television.
Already, the number of 4K-enabled television sets sold is rising now that prices have fallen and broadcasters begin to adapt.
This means that Ambarella’s best growth is still in the future, as 4K expands into home electronics with content from cellphones, live feeds, and streaming services.
A stock that is best of breed, has stout management, is buying back shares, has lots of cash on its balance sheet and offers short- and long-term growth prospects is a powerful combination.
Dr. Joe Duarte, Editor of Breakthrough Tech Profits