What Does Ambarella, Inc.'s (NASDAQ:AMBA) Share Price Indicate?

By
Simply Wall St
Published
December 02, 2021
NasdaqGS:AMBA
Source: Shutterstock

Ambarella, Inc. (NASDAQ:AMBA), might not be a large cap stock, but it saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s examine Ambarella’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Ambarella

What's the opportunity in Ambarella?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 15.78% above my intrinsic value, which means if you buy Ambarella today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth $173.04, there’s only an insignificant downside when the price falls to its real value. Is there another opportunity to buy low in the future? Since Ambarella’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Ambarella?

earnings-and-revenue-growth
NasdaqGS:AMBA Earnings and Revenue Growth December 3rd 2021

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. In the upcoming year, Ambarella's earnings are expected to increase by 46%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? It seems like the market has already priced in AMBA’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?

Are you a potential investor? If you’ve been keeping tabs on AMBA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for the company, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. You'd be interested to know, that we found 2 warning signs for Ambarella and you'll want to know about these.

If you are no longer interested in Ambarella, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.