Market Sentiment Around Loss-Making Ambarella, Inc. (NASDAQ:AMBA)

By
Simply Wall St
Published
June 28, 2021
NasdaqGS:AMBA
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Ambarella, Inc. (NASDAQ:AMBA) is possibly approaching a major achievement in its business, so we would like to shine some light on the company. Ambarella, Inc. develops semiconductor solutions for video that enable high-definition (HD) and ultra HD compression, image processing, and deep neural network processing worldwide. The US$3.8b market-cap company posted a loss in its most recent financial year of US$60m and a latest trailing-twelve-month loss of US$55m shrinking the gap between loss and breakeven. The most pressing concern for investors is Ambarella's path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.

View our latest analysis for Ambarella

Consensus from 17 of the American Semiconductor analysts is that Ambarella is on the verge of breakeven. They expect the company to post a final loss in 2023, before turning a profit of US$319k in 2024. Therefore, the company is expected to breakeven roughly 3 years from now. What rate will the company have to grow year-on-year in order to breakeven on this date? Using a line of best fit, we calculated an average annual growth rate of 67%, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
NasdaqGS:AMBA Earnings Per Share Growth June 28th 2021

We're not going to go through company-specific developments for Ambarella given that this is a high-level summary, though, keep in mind that typically a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

Before we wrap up, there’s one aspect worth mentioning. Ambarella currently has no debt on its balance sheet, which is rare for a loss-making growth company, which typically has high debt relative to its equity. The company currently operates purely off its shareholder funding and has no debt obligation, reducing concerns around repayments and making it a less risky investment.

Next Steps:

This article is not intended to be a comprehensive analysis on Ambarella, so if you are interested in understanding the company at a deeper level, take a look at Ambarella's company page on Simply Wall St. We've also put together a list of important aspects you should further research:

  1. Valuation: What is Ambarella worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Ambarella is currently mispriced by the market.
  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Ambarella’s board and the CEO’s background.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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