While Ambarella, Inc. (NASDAQ:AMBA) might not have the largest market cap around , it saw a significant share price rise of 40% in the past couple of months on the NASDAQGS. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock's share price. But what if there is still an opportunity to buy? Let's take a look at Ambarella's outlook and value based on the most recent financial data to see if the opportunity still exists.
What's The Opportunity In Ambarella?
Ambarella appears to be overvalued by 39% at the moment, based on our discounted cash flow valuation. The stock is currently priced at US$71.08 on the market compared to our intrinsic value of $51.19. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Given that Ambarella's share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Ambarella?
Future outlook is an important aspect when you're looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it's the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Ambarella's earnings over the next few years are expected to increase by 33%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? AMBA's optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe AMBA should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you've been keeping tabs on AMBA for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there's no upside from mispricing. However, the positive outlook is encouraging for AMBA, which means it's worth diving deeper into other factors in order to take advantage of the next price drop.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example - Ambarella has 3 warning signs we think you should be aware of.
If you are no longer interested in Ambarella, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
