Insider Selling In Ambarella Slacks Off Before Q3 Earnings
Insider activity in shares of Ambarella (NASDAQ: AMBA) is hinting at higher prices not because of buying but because selling has slacked off. Insiders have or had been making regular sales across the broad spectrum of holders all year but abruptly ended in September. We may be reading into the situation but the selling activity was consistent with options exercises and share-based compensation so the halt is noteworthy. Perhaps there are insiders hoping to make a big score who might be holding onto their shares in hopes of higher prices and the Q3 results certainly point to higher share prices.
On the institutional front, Insidertrades.com shows the ownership is very high at 74% and has been growing over the past year. While there has been plenty of rotation in the stock we chalk that up to profit-taking by early investors because the balance of activity has been bullish. The sell-side sentiment is always noteworthy because it is bullish and has been getting more bullish over the past 30, 90, 180-day periods. The consensus price target is lagging the stock’s price action but does not reflect the most recent activity and high-price target which suggests at least 20% of upside is still available. Based on the Q3 results we see the consensus and high price target both moving higher very soon.
AI/Computer Vision Leader Ambarella Exceeds Expectations
Ambarella was expected to produce a strong quarter simply because it is a microchip company but its position as a leader in AI/computer vision makes its products especially desirable. The company reported $92.17 million in net consolidated revenue which is up 64% from last year and 35.7% versus 2019 on strong demand in all segments. The revenue also beat the consensus by 2.0% which is saying something for a company with a bar set so high. Moving down, the company also produced a slight but no less important improvement in the gross margin that lead to outperformance on the bottom line as well.
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On the bottom line, the company reported $0.02 in GAAP earnings which is not only better than expected but reversed a loss in the prior quarter. On an adjusted basis, the $0.57 is up 78% from the same time in 2019 and beat the consensus by $0.08. Looking forward, the company is expecting revenue strength to continue but is guiding cautiously. The guidance for Q4 revenue is a solid gain from last year and 2019 but down sequentially which we do not see coming. This guidance also includes the addition of Occuli which should provide an incremental addition as soon as this quarter.
“Our transformation into a deep learning AIoT processing company took another leap forward with the acquisition of Oculli, a provider of advanced algorithms for high definition imaging radars. The radar perception market is incremental, but most importantly this transaction feeds into our long-term strategy to provide a more comprehensive AIoT processor to our customers,” said Fermi Wang, President and CEO. “Our operational execution remains strong, yet supply dynamics remain difficult to predict, as shortages of other companies’ components has become a more significant and gating factor to our results and outlook.”
The Technical Outlook: Ambarella Confirms Uptrend
The Q3 results and outlook had shares of Ambarella up more than 11% in after-hours trading in a move that confirms the underlying uptrend. Price action is confirming support at the short-term moving average with both indicators consistent with a swing in momentum in-line with the trend. This move should result in another new all-time high and, if so, a string of all-time highs that could take the stock up to the $220 level and possibly higher.
A number of brokerages have weighed in on AMBA. Cowen boosted their price objective on Ambarella from $140.00 to $150.00 and gave the company an "outperform" rating in a research note on Wednesday, September 1st. Morgan Stanley boosted their price objective on Ambarella from $137.00 to $222.00 and gave the company an "overweight" rating in a research note on Monday. Roth Capital upped their price target on Ambarella from $170.00 to $225.00 and gave the stock a "buy" rating in a research note on Wednesday, October 27th. Craig Hallum upped their price target on Ambarella from $150.00 to $170.00 and gave the stock a "buy" rating in a research note on Wednesday, September 1st. Finally, Rosenblatt Securities upped their price target on Ambarella from $160.00 to $210.00 and gave the stock a "buy" rating in a research note on Tuesday, October 26th. One research analyst has rated the stock with a sell rating, four have assigned a hold rating and eight have given a buy rating to the stock. According to data from MarketBeat, Ambarella has an average rating of "Buy" and a consensus price target of $163.58.
The business has a 50 day simple moving average of $174.61 and a 200-day simple moving average of $129.86. The stock has a market capitalization of $6.58 billion, a price-to-earnings ratio of -133.54 and a beta of 1.11.
Ambarella (NASDAQ:AMBA) last released its quarterly earnings data on Monday, August 30th. The semiconductor company reported $0.35 EPS for the quarter, topping analysts' consensus estimates of $0.25 by $0.10. The company had revenue of $79.30 million for the quarter, compared to the consensus estimate of $75.91 million. Ambarella had a negative return on equity of 9.69% and a negative net margin of 17.76%. The company's quarterly revenue was up 58.3% compared to the same quarter last year. During the same period last year, the business posted $0.06 EPS. As a group, equities analysts expect that Ambarella will post -0.53 EPS for the current fiscal year.
In other Ambarella news, Director Chenming Hu sold 3,666 shares of the firm's stock in a transaction that occurred on Wednesday, September 22nd. The stock was sold at an average price of $160.00, for a total transaction of $586,560.00. The sale was disclosed in a document filed with the Securities & Exchange Commission, which is accessible through the SEC website. Also, Director Christopher B. Paisley sold 736 shares of the firm's stock in a transaction that occurred on Friday, September 3rd. The shares were sold at an average price of $132.44, for a total value of $97,475.84. The disclosure for this sale can be found here. Over the last 90 days, insiders sold 22,402 shares of company stock worth $3,057,036. Company insiders own 5.60% of the company's stock.
About Ambarella (NASDAQ:AMBA)
Ambarella, Inc engages in the development and sale of video compression, image processing, and computer vision solutions. It offers processors and software that cater to end markets including security cameras, automotive cameras, industrial and robotic applications, and consumer applications. The company was founded by Feng Ming Wang and Leslie D.
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