AMBA Stock Could Soar on Drone Decision
The Federal Aviation Administration (FAA) has finally set the ball rolling for companies investing in drone technology. Chipmaker Ambarella, Inc. (NYSE:AMBA) and camera-maker GoPro, Inc. (NYSE:GPRO) are launching a lineup of drone cameras and both are poised to win big. Owners of AMBA stock should especially take notice.
If you haven’t heard already, the FAA approved commercial use of unmanned aerial systems (UAS) earlier this year. In order to make the technology more viable and safe, the regulatory body is now taking it a step further by making it mandatory for everyone who owns a drone to register themselves with the FAA for a nominal annual fee of $5.00. (Source: “FAA to Require Most Drones to Be Registered and Marked,” The Wall Street Journal, December 14, 2015.)
This marks a breakthrough in the drone industry, where growth was long stalled by the FAA in the absence of appropriate regulations. The feasibility of drone technology has long been questioned. Security and privacy concerns have kept flying cameras from finding their way into the mainstream where handheld or mounted cameras remain dominant. However, consumer interests are now shifting fast. Take, for instance, wearable cameras, which have become increasingly popular in the last two years.
The biggest winner I see is Ambarella, which is a pioneer in high-quality chips for flying cameras in the U.S. Although, the company’s flying cameras segment has remained relatively small compared to the other segments, this product line is expected to see a strong boost in the coming years.
Ambarella presently has one of the world’s largest drone makers as its clients. Chinese company DJI is world-renowned for its “Phantom” and “Inspire” lineups of drones, which are among the top high-quality, next-generation flying machines.
Additionally, wearable camera developer GoPro is another of Ambarella’s clients that is also betting big on drone technology. GoPro has just revealed footage taken by their soon-to-be-released drone camera, called “Karma,” which is receiving a lot of praise from drone and camera enthusiasts.
Less than a decade ago, the technology sounded almost like a dream. Drones were still very expensive and their use was pretty much limited to the public sector defense and security industry. Today, however, flying cameras have found utility in the private sector, where their commercial and recreational use is fast picking up demand from enthusiasts. Drone cameras are drawing interest from both professional and amateur camera lovers, particularly sparking strong demand from the broadcasting and filmmaking industries.
The Bottom Line on AMBA Stock
The close-knit buyer/supplier association of Ambarella and GoPro has caused a lot of pain to both the companies, especially their stockholders. For the last few months, AMBA stock and GPRO stock have moved in tandem every time a bad news headline came out from either of the two companies. But the latest news makes me optimistic that the stocks could post strong gains together, as the government commercializes this new technology.
Nonetheless, AMBA stock will be a certain winner because of its own and its top client’s, DJI’s, dominance in the drone industry. I’m bullish on this name through 2016.