AMBA - aggressive negative piece in SA

Investment Analysis Clubs Saul’s Investing Discussions
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http://seekingalpha.com/article/3228066-ambarella-growth-sto…
For those of you who are invested in Ambarella (myself included), there’s a negative piece in SA right now. It basically highlights risks of lower cost substitution and claims a barrier to further video tech evolution due to the retina level of HD visual recording.
The first point is I guess always a risk especially if a single chip function has no platform/moat. The second I don’t really agree with. Maybe that will be a barrier in sports action cameras but GoPro will want to keep on selling new models so even if the definition doesn’t advance you can bet other functionality will. Also in security cameras - higher and higher resolution is always valuable allowing every further zooming towards distant or small areas.

Anyhow - food for thought given that I’m up 75% since I bought in (about the same advance as my Skyworks Solutions stake) and I don’t particularly want to see it unwind.

I actually think Ambarella has the potential to advance further from here than Skyworks given its low market cap and the real sweet spot of visuals, displays, video, camera assisted operations, virtual reality etc.

Ant

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Looks like AMBA crushed earnings though, so press on:

Rev up 73.5%
Quarterly earnings up 281% from 25c to 71c
Margins up from 62.5 to 64.7%

Gator

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Cross post from a related conversation over at RB:

Well, revenues are up 73% and EPS is up over 200% vs. the year ago quarter. – Don

I see this headline after hours:

“Are Ambarella Holders Too Exhausted To Chase Solid Earnings?”

According to my news feed, earnings came out at 4:05 today. The article came out at 4:41. What’s that? 36 minutes later there is speculation that investors aren’t reacting “properly” to the earnings announcement?

LOL

In my opinion and in the usual opinions of most around these boards, the “news” articles and “analysis” really is just noise. To be ignored (except now I’m pontificating on it! LOL).

The only useful news is the earnings report and the conference call. Focus on that plus possible subsequent news from the company as well as actual news on competitive action. Ignore these poor analysts who have to print SOMETHING to hold their job even if it’s drivel.

And kick back. Say to yourself “Self, it was a fine report. All is well. Let’s look again in three months. But in the meantime, let’s share actual news and views with our fine Fool friends in celebration and possibly some insight.” Take your significant other out to dinner and share with them your wisdom in having bought AMBA. Tell your friends who prefer to buy junky companies instead. And lay your head down tonight with a smile.

Getting rich is simple from an intellectual standpoint. Don’t let your heart (emotions) send you off to the sell button, howling in fear. That’ll slow down your wealth machine you’ve got here.

Rob

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Ant,
I read that article (I usually pretty much ignore most things published on SA). The author’s point was pretty much that once your at 1080p resolution, you’re at the end of the line for video (the author more or less asserted that no one really needs or benefits from 4K video). So with this upper end on resolution being the limit of what you can deliver, it’s only a short while for AMBA competition to put a lot of price pressure on them and therefore earnings will crumble.

A similar question was put to Fermi Wang, AMBA CEO during the conference call. In part here’s his response:

Right. So, yes, you’re right. Of course in the past, we continue to pushing the envelope on the performance based on the resolution and frame rate. I think that suppose there is other angles you need to look at. For example there’s a huge transition from H.264 compression to HEVC, HEVC provides 50% compression efficiency improvement, but our estimation the [indiscernible] size and on the importer side is five times more complicated.

So after that if you want to continue improved performance based on HEVC and higher frame rates, high-resolution really create another barrier to entry especially if you want to maintain the power number as a reasonable numbers of our portable cameras customer can fit HEVC say full HD camera into the same form factor. So there are multiple angles that we are addressing right now.

In addition to that many features that we talk about has new topic on cameras. We talk about high dynamic range, which is twice higher performance, which is compared to low dynamic range and high dynamic range solution. We talk about low light performance, we talk about video analytics in fact video analytics in my opinion going to get bigger and bigger in fact.

We did quick as we mentioned about the performance required to implement all of the video analytics feature that we need to implement in next few years the number is a mind-boggling. So I think there’s many other ways in addition to just a frame rate and the resolution that we can continue to push the performance and so that we can continue to introduce higher end products in the future.

I won’t pretend that I understand everything he said in detail, but in a nutshell, there are a host of factors beyond resolution that contribute to AMBA’s competitive advantage. Compression, power consumption, low-light performance, dynamic range, video analytics, physical weight and size - probably more things he didn’t even mention at the spur of the moment.

I’m not selling - I’ll be buying more as soon as I can raise some cash.

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Thanks Brittlerock - yes I saw that too.
For those who haven’t seen the transcript of the conf call, here it is…
http://seekingalpha.com/article/3231526-ambarellas-amba-ceo-…

It’s very encouraging. The only disappointing note to me was how they are over priced or over spec for the US police wearable market, although the China market seemed to be loading up on the stuff. Maybe the Chinese police force and people’s army are larger than the US.

Also - Mobileye are called out and put on warning!
Ant

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I see this headline after hours:

“Are Ambarella Holders Too Exhausted To Chase Solid Earnings?”

According to my news feed, earnings came out at 4:05 today. The article came out at 4:41. What’s that? 36 minutes later there is speculation that investors aren’t reacting “properly” to the earnings announcement?

Well, all I can say to that is that I added to my position in the after hours position at slightly above the closing price. Thanks to whomever hit the sell button!

Chris

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Maybe the Chinese police force and people’s army are larger than the US.

At the Stifel Technology Conference earlier this year, CEO Wang estimated the size of the police force in the US at approximately 800,000. and in China: 8,000,000.

He also noted that this is not the area of greatest potential for growth. While action cameras continue to provide the greatest revenue, IP Security is the fastest growing market. And it is interesting to see how quickly the drone market appears to be heating up.

Best, Swift…
Long AMBA

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The only disappointing note to me was how they are over priced or over spec for the US police wearable market, although the China market seemed to be loading up on the stuff.

That wasn’t my interpretation. Wang said they’re in active talks with U.S. and European police: “we also involve on a lot of resolving discussion with U.S. and European customers and we usually don’t talk about the customers before they announced it.”

But then the analyst asked specifically about 40 nanometer, since it offers even better battery life (beyond 8 hours). And that’s where Wang said that 40 nanometer will be expensive to start, and really only will be targeted at their high-end markets in the beginning: “So 40-nanometer is so expensive I think you will go to other high-end market first before go to wearable, but yes if people can afford the price that 40-nanometer will make the battery life even longer.”

That was my impression, anyway.

Neil
Long AMBA

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Swift…thanks for the rec! My opinion for what it is worth is that flying cameras are going to be more popular than anyone thinks. AMBA will be a $150 by the end of this year or after whenever they report the December quarter.

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Flying cameras are fine until they suffer from a control lapse or run out of battery juice. At that point they crash. The ones that are popular aren’t micros like the ones I play around with. The popular Phantom 3 with camera weighs a hefty 9 pounds. When that 9 pounds hits someone at speed there are going to be injuries. Worse injuries if the props are spinning. They are inherently dangerous.

They are going to be regulated. Pilots are going to need licenses, and the drones will need to be clearly labeled with owner identification.

The ones that are easy to fly and can be flown out of line of sight and return to user are also expensive, $1200 or so each.

Flying fixed wing R/C model aircraft, many of which are too small to do much damage, is already banned inside the city limits where I live. Drones are just a form of model airplanes. The new ones have gotten popular because they can fly programed courses and automatically return (usually) to the place where they took off.

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GauchoChris, I added some immediately after earnings too. The earnings were great as were the conference call notes. Good for you getting in after hours, I did not know how to do that so ended up paying $97 the next day (which obviously I’m still ok with since it’s at $114 now). I also know how to trade AH now - I didn’t know that Joe public could do that. So thanks for that.

My question (apart from wondering if Saul et al take advantage of AH trading from time to time), is about the time period of 1-2 days after earnings are announced. It seems to me, that in some cases the market takes a couple of days to reach equilibrium. That is, earnings are announced, and mr market takes notice to some degree. Then perhaps a day later various analysts fiddle with their price targets and ratings, and mr market may notice again. So in some cases there seems to be a partial lag in the market’s reaction to news.

So… do the experienced investors on this board situationally favor trading right after earnings, in an effort to get out in front of the analysts? Thanks.

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My question (apart from wondering if Saul et al take advantage of AH trading from time to time), is about the time period of 1-2 days after earnings are announced. It seems to me, that in some cases the market takes a couple of days to reach equilibrium. That is, earnings are announced, and mr market takes notice to some degree. Then perhaps a day later various analysts fiddle with their price targets and ratings, and mr market may notice again. So in some cases there seems to be a partial lag in the market’s reaction to news.

So… do the experienced investors on this board situationally favor trading right after earnings, in an effort to get out in front of the analysts?

Utahchris,

I don’t spend too much time thinking about what the market will or won’t do. For the some companies that I follow closely, I have an idea/forecast of what I think the earnings will look like in the coming year to 18 months. When a new quarter is announced, I get new information about the most recent quarter and my view of the next year to 18 months can then change depending what is said on the conference call. I take into account my allocation, how the company in question fits into my overall portfolio, and the stock price on offer.

So to take AMBA as an example, I was reading the press release immediately after earnings were announced and then I read some key points from the earnings call. Based on this, I decided that I wanted to own more shares. I also saw the the price on offer in the after hours market did not really go higher than the closing price so rather than waiting until the next regular trading session, I decided to take the price.

As I mentioned, I don’t pay much attention to other people’s opinions unless I see a reason to agree with their premises and conclusions. I do think that I can respond to new information more quickly than analysts who would need to update their models and then get that information to various portfolio or fund managers who then need to move a large number of shares to make significant (or even small charges) position changes. Meanwhile, I can make a decision in minutes and have my trade be executed in seconds. So, yes, sometimes there are opportunities to get into or out of a stock. I think Saul recently did the same with PSIX and EPAM when the market reacted in a funny and unexpected way immediately after an earnings announcement. I would say that you can take advantage of such opportunities if you have a) a good understanding of the company, b) your own idea of what you think the company should be worth, and c) strong conviction in your opinions and decisions while ignoring the opinions of others that don’t make any sense to you.

Hopefully that helps.

Chris

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Chris another post filled with good reasoning. A them of the group is that we need to learn to separate our emotions from the crowd, I think a great first step is to look at the earnings release AND before you listen to anyone’s interpretation of a release form your own opinion. Write it down. Then you can safely read what others say, did you miss information? Is your analysis sound? The way not to be swayed by crazy crowd reactions is to think for yourself first.

As to the question about after hours trading, for I became a TMF I did some after hours trades but not a lot. Now with the training restrictions and needing to get preclearance before buying or selling it’s not really possible. But I don’t think I’m missing much not being able to trade after hours if you’re right on accompany the starting price just isn’t that big of a deal.

You can see all my holdings on my profile, I am currently long AMBA

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http://discussion.fool.com/here-is-this-weeks-overlap-count-amba… overlap recommendation

AMBA tops the list by far with a score of 21. (10 or 12 is the usual high number) So AMBA is very well known…

Other Saul type stocks on the list with a score of 6 are PAYC,SWKS, SYNA. ( i don’t think Saul has recommended PAYC)

6 or above being the cut off number, the point where I am less inclined to buy new shares. Those high up on the list might be OK for short term trading but show that the company is well known.