Could Ambarella Stock Hit $85.00 Before the End of 2016?
Ambarella Inc (NASDAQ:AMBA) stock once sold for as high as $125.00. Coincidentally, this happened in July 2015, just as GoPro Inc (NASDAQ:GPRO) was also enjoying a bullish run. Ambarella stock, in fact, does well when GoPro is also doing well. Ambarella makes the semiconductors that make GoPro’s cameras so desirable.
Now that GoPro can expect a surge of demand for its new “Karma” camera drones, Ambarella stock will continue to rise along a bullish curve, which analysts at Canaccord Genuity Group Inc (TSE:CF) believe will hit $87.00. Indeed, this is the new price target. It had been rated as “buy” with an $86.00 target until a recent upgrade. (Source: “Ambarella (AMBA) Stock Price Target Increased at Canaccord Genuity,” TheStreet, October 12, 2016.)
Two Elements are Backing the Bullish Potential for AMBA
For those who like technical analysis (TA), Ambarella stock has typically been highly communicative. Even if you don’t subscribe to the TA school, the Ambarella chart has shown what is known in the jargon as a “trend reversal.” And it does it exactly what it says. AMBA stock was in a kind of limbo for the first half of 2016.
What you need to know is that as of last July, AMBA stock gained more, on average, in 50 days, than it lost over 200 days. Technical analysts interpret this intense—in this case, bullish—activity as a gauge of the trend. In the case of Ambarella shares, the course appears to be bullish. And recent movements are even more persuasive.
As for the facts to back up the chart’s bullish message, note that AMBA has been moving almost in parallel with GoPro, in other words on the potential demand for the famous camera—and now drone—maker’s products. Investors have started to realize that there’s more to Ambarella. More importantly, Ambarella understands that there’s more than GoPro cameras and Evel Knievel wannabes.
This is an important and bullish realization, because it shows that Ambarella is trying to diversify, even as it has not reached the full potential of the action-camera market. The company’s diversification is already happening, and it has a big target: automotive. There is the obvious demand from such items as dash cams. Police forces and security companies want better equipment and, like China’s Internet security provider Qihoo 360 Technology Co Ltd (NYSE:QIHU), they have sourced the chips from Ambarella. (Source: “Ambarella, Inc. (AMBA) Q2 2017 Earnings Conference Call,” NASDAQ, September 1, 2016.)
Ambarella is Diversifying: HD and Automotive are Major Sources of Growth
The Ambarella-powered dash cams enhance user experience with high definition (HD) resolution. They also offer many features that drivers and passengers want. These dash cams are something of a driver-assist technology package. They warn drivers about the imminent risk of a collision and detect the motion of the car ahead.
While these are aftermarket products, the AMBA stock moving capacity comes from working with original equipment manufacturers (OEMs). Indeed, Ambarella could become a major player in the field of driverless technology. All the major carmakers are moving in the driverless direction. So dash cams are opening markets for Ambarella in the aftermarket GPS segment, with such companies as Garmin Ltd. (NASDAQ:GRMN), and with car companies themselves.
Driverless options are available for many current luxury cars. Tesla Motors Inc (NASDAQ:TSLA) has famously called its system “Autopilot.” Mercedes Benz, Audi AG, Nissan Motor Co Ltd, and Toyota Motor Corp, through their luxury divisions, are catching up. These systems rely on multiple cameras and sensors. The data they collect visually has to be processed electronically. Ambarella is poised to take advantage of this emerging technology.
But there’s more. It’s not just driverless cars. Ambarella has a role to occupy in the so-called Internet of things (IoT). The company’s IP security chips can be used to create interconnected communication systems between computers and machines. In this respect, Ambarella has a major client in the form of Hikvision, a rising security equipment company.
Ambarella’s chips are also ready to work with ultra-high-definition (UHDTV) or 4K, which have a potential market of about one out of every eight households in 2016 alone. (Source: “Everybody Wants 4K: New Research Shows Massive UHD TV Sales Surge,” Forbes, May 25, 2016.)
The 4K market is growing fast in the United States, but its global potential hasn’t even registered yet. This is why Ambarella stock’s potential is so bullish, and market sentiment appears to be catching up.