Remember Ambarella - A Brief Update

I have written a number of articles about this company’s computer vision chip technology and thought the board would be interested in the latest developments, as a few years ago this company was, if my memory serves me correctly, part of Saul’s portfolio.

Ambarella makes SOCs for cameras. Its key customer used to be GoPro. This is no longer the case as GoPro has switched to an ASIC design and no longer will use AMBA’s products in its new cameras. The result of this lost has pushed Ambarella stock down this year.

There are a couple of things you need to know about Ambarella.

  1. The company is incorporated in the Cayman Islands with its headquarters in Santa Clara. Therefore it has a lower tax rate than most U.S. companies.

  2. It has $400 million in cash and no long-term debt on its balance sheet. Since it is not a U.S. company the cash on its balance sheet does not require any repatriation tax. It amounts to about $12/share in cash.

  3. The company is an asset light company - it consists of R&D, marketing, and sales. There are only about 670 employees in the company and most are located in Asia and most are R&D folks.

  4. It outsources its wafer fab manufacturing, packaging, and test. The main fab it uses is TSMC.

  5. Ambarella acquired an Italian company called VisLab in mid-2015. VisLab is essentially an R&D company that developed a software stack for autonomous vehicle driving. The company’s claim to fame is having driven a driver-less vehicle from Italy to China using its software and system.

  6. Ambarella designed a silicon SOC around VisLab’s software stack. The company got its first product back out of the fab a few months ago and it works. Ambarella will begin sampling on the new product in Q4.

  7. The product will be the first of a product line based on computer vision technology and is called CV1. Expect two new computer vision chips per year.

  8. The company expects to ship CV1 in 2018. It will have applications in security cameras, robotics, and autonomous vehicles to name a few.

  9. The company plans on doing a full publicity roll out at the Consumer Electronics show the first week in January.

  10. It will take more than a year maybe even two to gain much volume from the automotive space due to a long design cycle for cars. They will be selling into other markets much sooner.

  11. The key advantages for the Ambarella computer vision technology will be cost, as they optimized the chip design for their own software. The product will offer real-time computing capability, very important for autonomous vehicles, work in low ambient light conditions, and require low amounts of power.

  12. The CV1 product will not have video compression on board, applications requiring video compression will require a second chip and circuitry to support the second chip. Future generations of the Ambarella product will incorporate video compression into the SOC which will be a big cost saver for customers.

The stock is up almost 8% today on a Morgan Stanley note which puts a $60 price target on the stock and points to $115 price in its most bullish scenario.

Here is a link to a benzinga article about the Morgan Stanley note.…

If you are wondering about a possible acquisition the enterprise value for the company is only $1.2 billion and Intel paid $15.3 billion for Mobileye.

I wonder if a Chinese company might try and buy AMBA to gain the technology as it would not have to contend with approval for the deal from the U.S. government.

Frank - long AMBA, see profile for all holdings


Ironically, about 2 years ago Citron put a 18-month, $40 price target on AMBA when it was trading wayyyy up at $120. They were off by ~6 months.

Looked at differently, if even Citron thought it was worth $40 back then [who know about today] then that could be a reasonable floor on valuation.

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You also may want to consider their share based compensation as well. They are giving away 20% of their quarterly REVENUE in stock based compensation. In their last earnings report their share based compensation amounted to $0.42 of their Non-GAAP earnings of $0.48. This is a very very shareholder unfriendly company literally giving away all their earnings generated back to their employees. If they have $400M in cash wouldn’t you think they could just pay their employees in cash?


I like to think I’m not too greedy but there comes a time when enough is enough.
I have purposefully forgotten everything I ever knew about AMBA except that I owned
it several times until I realized that the profits were never going to be mine. I
always lost money owning it.…

I wish you much better luck. Or if it was a matter of skill I admit I was not smart
enough to own AMBA.