Ambarella (AMBA) started Wednesday morning where it left off yesterday, climbing higher on the heels of an earnings beat in the fiscal second quarter. The stock is up 11% so far today and 21% in the past week.

This comes after the company delivered a narrower loss than experts were expecting with EPS of -$0.13 compared to the estimate of -$0.19. 

Profitability is moving in the right direction, and sales grew in the quarter too. Revenue of $63.73 million was a 2.6% improvement year over year and surpassed the analyst expectation of just $62.1 million.

The growth in sales was driven by an all-time high in Ambarella’s edge AI inference products. These are a unique solution that allows a user to run AI tasks on their own local electronics (such as cameras or sensors) without having to transmit data to the cloud.

Ambarella is expecting better performance in Q3 now as well. Revenue guidance got a lift to a range of $77 million to $81 million. Analysts are only expecting $69 million, setting up nicely for another beat. Gross margin is now forecasted between 62.5% and 64%.

Just last quarter hedge fund managers offloaded a whopping 192,300 shares. The rally we’ve witnessed over the past week, and especially the past 48 hours, suggests those same sellers could have become buyers again.

In looking at the analyst outlook on AMBA, the average price target of $70.70/share implies a nearly 35% upside. So, is now a good time for you to buy AMBA too?

We’ve taken a look at this opportunity in the VectorVest stock analysis software and found 3 things you need to see before you do anything else.

AMBA Has Very Poor Upside Potential and Poor Safety Despite Excellent Timing

VectorVest empowers you to win more trades with less work and stress. It takes complex technical indicators and fundamental data, distilling them into clear, actionable insights. 

You’re given everything you need to make calculated, emotionless decisions in 3 ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each sits on a scale of 0.00-2.00 with 1.00 being the average. 

This makes for quick and easy interpretation, but it gets even better. You’re given a buy, sell, or hold recommendation for any given stock at any given time. Here’s what we uncovered for AMBA:

  • Very Poor Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. It’s a much better indicator than the typical comparison of price to value alone. AMBA has a very poor RV rating of 0.22.
  • Poor Safety: The RS rating is a risk indicator. It’s calculated from an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. The RS rating of 0.76 is poor for AMBA.
  • Excellent Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year to paint the full picture for investors. AMBA has an excellent RT rating of 1.51.

The overall VST rating of 1.04 is fair, but it’s not enough to earn the stock a buy recommendation just yet. AMBA is still a HOLD in the VectorVest system.

If you’re awaiting an opportunity to trade this stock, though, we encourage you to dig a bit deeper with this free stock analysis at VectorVest. Simplify your trading strategy today!

Shares of Ambarella Climb 11% After Earnings Beat, Guidance Upgrade: Is it Time to Buy AMBA?

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VectorVest advocates buying safe, undervalued stocks, rising in price. AMBA improved on both the top and bottom lines in the second quarter and is forecasting more revenue growth and gross margin enhancement for the current quarter. The stock itself may have excellent timing, but very poor upside potential and poor safety are holding it back.

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