Forward looking, the company is positioned to keep its solid performance across all the business lines. The growth in the company’s V8 architecture licensing has been extremely good and ARM’s partners are adopting the company’s 64-bit architecture in a big way for servers and networking products. According to Barron’s, Intel Corporation (NASDAQ:INTC)’s Atom takes three times the number of transistors to implement functional blocks that perform similar workloads, a sign of being less efficient than ARM-based designs. In addition, the Intel x86 architecture uses the “variable length instruction word” approach, making it harder to streamline aspects of what are “monolithic” server processors. This is the key advantage that will make ARM keep performing well in the future.
I think that ARM is well positioned to hold a leadership position in the smartphone and tablet market. In a recent report, Canaccord Genuity analyst Matthew Ramsay projected that ARM share in microprocessors will increase to 50% from 32% at present by the end of the decade.
Great growth opportunities for Ambarella Inc (NASDAQ:AMBA)
Ambarella Inc (NASDAQ:AMBA) is a leading developer of semiconductor processing solutions for video that enable low-power, high-definition, video capture, sharing, and display. This company went public on October 2012, yielding to date a 136% return to reach a market capitalization of $387 million. Ambarella Inc (NASDAQ:AMBA) technology is being increasingly used in a variety of HD cameras including security IP-cameras, wearable sports cameras, digital still cameras, and automotive video recorders. The company is an established market leader in video content creation and is leader in sub-segments such as IP security camera, automotive cameras and sports cameras. I think that video processing applications or devices face no competition from video enabled smartphones.
Although Ambarella Inc (NASDAQ:AMBA) is a relatively unknown firm, with only four analysts covering the stock and a short financial history to use as a reference, growth and profitability numbers look promising.
Revenue growth was 24.5% for the past fiscal year to total $121.1 million, and is expected to grow at a similar pace in the foreseeable future. Gross margins are stable at 66.6%, net profit margin was 15%, and Ambarella Inc (NASDAQ:AMBA)’s balance sheet shows a strong position with no debt, and cash and cash equivalents of $100 million. EPS consensus estimate for the next fiscal year is $0.84, which implies a 40% EPS growth. In spite of the expected high EPS growth, Ambarella is trading at a reasonable P/E of 22x, which makes it appear relatively cheap given its high growth potential.
Forward looking, I believe that Ambarella Inc (NASDAQ:AMBA)’s growth could come from the security market, which is migrating from analog standard definition to IP HD cameras. Ambarella Inc (NASDAQ:AMBA) offers security products that are superior to its competitors and this category should be one of the future growth catalysts of this company.
I like how the company is positioned in the automotive and sports camera markets. In addition, Ambarella’s CEO Fermi Wang was very bullish on how Ambarella will grow in the IP security camera market. He explained that the security market is under a secular migration from analog standard definition cameras to digital, IP-based high definition cameras. This is the kind of technology that Ambarella does best and security cameras represent just 10% of the company’s total revenue pie. This security camera segment represent strong potential growth.
My Foolish conclusion
To summarize, I recommend buying Ambarella and ARM, and buy Tesla Convertible bonds to hold them for the long run as the shares could face material volatility in the near future.
The article Are You Ready To Invest in Tenbaggers ? originally appeared on Fool.com.
Victor Selva has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors . The Motley Fool owns shares of Tesla Motors. Victor is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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