AMBA today

Yesterday it was INFN, today it’s Ambarella, down 10% on no news that I can find (other than GPRO stock doing poorly).

Annoying as it is, I think this is still fallout from the Citron “research” article, now self-fulfilling. (If I ever meet that guy …)

At this point, you either believe the company leadership that they’re going to keep exceeding expectations and hold on for a longer-term (1+ years…I’m guessing at least 2 before we see $120 again), or you cut your losses and take a hit. Neither of those are all that appealing, but some you win and some you lose, and some get taken from you by those who work the system in a negative way. If you believe the story, though, it’s a whole lot cheaper now than before… but I can see the irrational market pushing it all the way to $50 or even $45 before it finally holds (not that I want it to).

2 Likes

It’s because GoPro analysts are downgrading that company, mostly based on channel checks. My own personal experience is that channel checks are unreliable, but I don’t follow GoPro at all and have no idea.

I have to confess that GoPro has always seemed very niche to me (and faddish outside of that niche). Our family owned one and used it maybe twice over a period of years before we finally got rid of it, but we use our phones on a daily basis for photos and video. We also live in an athletic, touristy area, and for a while it seemed like everyone was wearing a GoPro, whereas these days you only see them occasionally. If AMBA weren’t actively diversifying away from GoPro, I don’t think I’d own them.

But when it comes to deciding whether to add, trim, or simply hold AMBA, the questions to my mind now are (1) is GoPro the business really suffering? (2) if so, is it just GoPro, or is it the whole sport camera industry? (3) if so, is it just a rough patch, or is this the beginning of a long decline as the capabilities of phones constrain growth outside of the traditional niche of extreme sports enthusiasts? (4) What will the impact realistically be on Ambarella’s business, both in the short term and the long term? (5) how much of any possible negative impact has already been priced into the AMBA stock, leaving potential for upside from here as we get more clarity into the business over the coming quarters (even bad news can be good for a stock if it’s better than what the market was expecting, especially if it removes uncertainty)?

And, of course, weighing that against other opportunities for the capital.

So far, I’ve added to my position on the way down. TMF has too, and so has Saul. But if it does turn out the sports camera industry is in trouble, that will definitely represent a change from what I’ve been expecting in the short term.

All just my 2 cents, of course.

Neil
Long AMBA

22 Likes

the questions to my mind now are (1) is GoPro the business really suffering? (2) if so, is it just GoPro, or is it the whole sport camera industry?

I ask if #1 and #2 are yes then what will be the impact on AMBA sales and earnings. If GoPro was 30% of revenue then this percentage of AMBA’s revenue would be declining even if GoPro were still growing. This is because the other sources of revenue are growing faster. I focus on the other parts of AMBA’s business which are all rapidly growing.

If GoPro’s business were cut in half over the course of the coming year then AMBA would take a 15% revenue hit assuming zero growth of their other businesses. If the other sources of revenue are growing at only 20% then a 50% cut to GoPro’s business would mean AMBA’s revenue would be neutral. But the other business are growing faster than 20% I think and I doubt GoPro sales will drop by half next year. Put another way a 40% increase in ABMA’s non-GoPro business would completely replace AMBA’s GoPro revenue!!

So just how fast are the other sources of revenue growing? Flying cameras are now 10% of AMBA’s entire revenue and I don’t recall them being a significant contributor in the prior year. Security cameras. Car camera. Body cameras. All are growing.

The lower AMBA’s stock drops the stronger my conviction grows because I don’t believe that there is a huge competitive threat in the next 12-18 months. Just my opinion…

Chris

25 Likes

I wanted to add a little commentary on GPRO, as I think I’m one of the few holders of the stock on this board. The big question has always been whether or not the products are a fad or whether there is staying ability either through repeat purchases or some way of profiting off of an ecosystem, for lack of a better word. I wanted to share some operating data from the company:

           
                Revenue    Diluted EPS     TTM EPS*    Y-O-Y Rev Growth
               --------    -----------     -------     ----------------
Q2 2015          $420         $.24          $1.28            71%
Q2 2014          $245         $(.24)        $.16             38%
Q2 2013          $177         $(.06)         NA              NA 

Q1 2015          $363         $.11          $.80             55%
Q1 2014          $235         $.08          $.34            (8%)
Q1 2013          $255         $.18           NA              NA

Q4 2014          $634         $.83          $.77             75%
Q4 2013          $362         $.33          $.44             NA
Q4 2012           NA           NA            NA              NA

Q3 2014          $280         $.10          $.27              46%
Q3 2013          $192         $(.01)         NA               NA
Q3 2012           NA           NA            NA               NA

* using fully diluted, GAAP earnings

This isn’t the easiest to read chart, so I’ll summarize what I think are the most interesting points to me:

  1. For the last 5 quarters, year-over-year quarterly revenue growth has been 71%, 55%, 75%, 46%, and 38%. That’s pretty good.

  2. For the same trailing five quarters, GPRO’s fully diluted TTM EPS has been $1.28, $.80, $.77, $.27, and $.16. That’s really good.

  3. That shows me that unlike so many “story stocks” GPRO’s revenue growth is ALREADY translating into hard profit. A fully diluted TTM EPS of $1.28 currently translates into a trailing PE of under 22. Seems cheap to me.

  4. If GPRO is a fad, none of this data matters; once the fad is over GPRO will disappear into some quiet corner of the stock market. But given that the most recent quarterly revenue grew year-over-year by 71%, I don’t think the numbers currently suggest that the company’s success is due to the product being a fad. Or perhaps more accurately, if GPRO really is a fad the fad is still in full effect. We’ll know more in a few weeks when GPRO announces results for Q3.

The market clearly believes the product is a fad; I can’t think of any other justification for why a company growing both sales and net income at such great rates is trading for a trailing PE of under 22.

I do not do a very good job of predicting the future. There are dozens of consumer products that I do not understand. And I include GPRO cameras in the group. But so far the numbers are telling me a different story.

Unfortunately for me, the market may forever view GPRO with a “prove it” attitude, much like it currently does with AAPL. No matter how many quarters Apple continues to crush it, the market always seems to think, “OK you had a good quarter, but I bet you can’t do it again next quarter,” no matter how many great quarters Apple has. That’s a perception battle that is difficult to overcome.

And I suppose that filters down to AMBA as well. But to the extent that AMBA’s numbers are tied to GPRO’s results, I’d say AMBA is looking just fine.

Fletch
Long GPRO, AMBA

50 Likes

Great posts, guys!

Neil

*Q2 2015          $420         $.24          $1.28            71%*
*Q2 2014          $245         $(.24)        $.16             38%*
*Q2 2013          $177         $(.06)         NA              NA* 

*Q1 2015          $363         $.11          $.80             55%*

Fletch,

I don’t follow GPRO so I’m not familiar with their financials. But in looking at your post I don’t see how you got $1.28 in TTM EPS. The last 4 quarters that your posted seem to add to 5 cents in TTM EPS.

Chris

The 4 quarters you listed are not the last 4 quarters. Look at the year. I get .24, .11, .83, .10 from column 2 for 1.27 or /27, .77, .80, and 1.28 from the third column for 2.12.

Got it. I missed that they weren’t in order.

Well, they were in in an order, just not the one you thought they were in!

Thanks for the data Fletch, and no offense meant, but that was the most effed up table I’ve ever seen! :wink:

BTW, I’m with you in GPRO. Unfortunately, obviously down as it recently hit a new low, but I think their numbers are worth the small investment I have in them and I think they’ll continue growing.

2 Likes

Thanks for the data Fletch, and no offense meant, but that was the most effed up table I’ve ever seen! :wink:

I know :slight_smile: I was trying to show three different things, and I should have just posted three different tables, one for each point I was trying to make instead of cramming it all into one. I got lazy.

But if you follow the quarters, it really does work :slight_smile:

Fletch

4 Likes

Thanks for the data Fletch, and no offense meant, but that was the most effed up table I’ve ever seen!

I actually enjoyed it! A different way of looking at it. A bit of a brain tease. I like those kinds of games and suggest a bit more complexity. Ha!

Thanks Fletch!

Alex

1 Like

I wanted to add a little commentary on GPRO, as I think I’m one of the few holders of the stock on this board.

Fletch - you’re not alone. I’ve been holding GPRO as the numbers look right to me too. Just shows how emotional and irrational the market can be. If they continue to grow or have upside earnings, articles will be published saying how it was oversold, and the market will swing back. If they miss earnings we might have to cut our losses.

Hard to believe it is below the IPO price with that kind of growth.

I’m concerned GPRO’s press releases have not addressed the market concerns head on. This is a red flag in my book, but waiting for the next earnings release.

Thanks for posting!

1 Like

that was the most effed up table I’ve ever seen!

Perfectly sensible for comparing YoY quarter information.

2 Likes

If GPRO is a fad, none of this data matters; once the fad is over GPRO will disappear into some quiet corner of the stock market. The market clearly believes the product is a fad; I can’t think of any other justification for why a company growing both sales and net income at such great rates is trading for a trailing PE of under 22.

GPRO certainly boosted the popularity of action cams, but I just don’t see the “moat.” Plenty of new action cameras hitting the market are eroding GPRO’s market share.

http://www.techradar.com/us/news/photography-video-capture/c…

Are AMBA products in other action mfr’s cams (Garmin, Sony, etc)?

Last night I saw a TV ad for a dash mount action cam; $39.95 + S&H.

1 Like

Some customer names here although the article is from earlier in the year.

Rob

http://news.investors.com/technology-click/021015-738835-amb…