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

While Ambarella, Inc. (NASDAQ:AMBA) might not be the most widely known stock at the moment, it saw significant share price movement during recent months on the NASDAQGS, rising to highs of US$84.01 and falling to the lows of US$46.07. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Ambarella's current trading price of US$46.79 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Ambarella’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for Ambarella

Is Ambarella Still Cheap?

Great news for investors – Ambarella is still trading at a fairly cheap price. According to my valuation, the intrinsic value for the stock is $73.01, but it is currently trading at US$46.79 on the share market, meaning that there is still an opportunity to buy now. However, given that Ambarella’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What kind of growth will Ambarella generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -5.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Ambarella. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although AMBA is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to AMBA, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping an eye on AMBA for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Keep in mind, when it comes to analysing a stock it's worth noting the risks involved. For example - Ambarella has 3 warning signs we think you should be aware of.

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.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.