Well, quarterly Ambarella (AMBA) earnings are out, and yet again, they are absolutely stellar.
The Q1 Ambarella earnings beat marks 11 straight quarters — ever since analysts first started following it — that AMBA stock has beaten expectations.
Not surprisingly, Ambarella stock is roaring higher today, just as it has roared higher in recent years on the heels of its remarkable earnings growth. At this point, it’s tough to see exactly when this rally will end.
The company, which is best known as a GoPro (GPRO) supplier, specializes in making HD-quality, low-power video and image compression, and also provides chips for IP security cameras, automakers and (increasingly) drones.
This broad diversification into a variety of high-growth markets sets AMBA stock apart from its would-be peers, and is a big reason Ambarella earnings — and revenue — keep walloping expectations.
Q1 Results
Ambarella saw sales rocket higher in the first quarter of fiscal 2016, which ended on April 30. Revenues of $71 million soared 73.5% from the same quarter a year ago. That was quite enough to top consensus expectations, which called for $67.36 million.
Non-GAAP earnings per share — an earnings measure excluding stock-based compensation and associated taxes, as well as one-time items — rose 284% year-over-year, going from 25 cents a share to 71 cents a share. That also easily topped Wall Street’s consensus estimates, which called for 59 cents per share.
Ambarella’s first-quarter EPS were even good to beat the Street’s “whisper number,” which purports to be what Wall Street really expects earnings to be. The whispers weren’t quite bullish enough, calling for just 65 cents per share.
Big Customers and a Bright Future
While most discussions about Ambarella include a mention of GoPro, GPRO isn’t the company’s only major customer. Xiaomi, the largest smartphone-maker in China, is also kicking off a line of wearable cameras, and AMBA supplies the video chips for those products as well.
Aside from wearable cameras, AMBA is heavily entrenched in the emerging drone industry, supplying chips that go inside products from the current market leader, DJI. Even more exciting, Ambarella will be able to parlay its well-established business relationship with GPRO when GoPro goes heavily into the drone vertical.
The drone market is expected to be worth about $1.9 billion in 2016, and by entering the rapidly growing industry, one analyst expects GPRO to earn $500 million more in revenue.
An example of yet another segment that AMBA is gaining an early advantage in would be HD home cameras; CEO Fermi Wang mentioned on the conference call that his company was supplying the video chips for the new line of home cameras from Comcast (CMCSA).
Bottom Line
After Tuesday evening’s earnings announcement, it’s as clear as ever that AMBA stock remains primed to outperform. I’m certainly still a believer: I took a bullish position in AMBA call options in late 2013, and to date, it’s the single best trade I ever made.
Last November I dubbed AMBA the “best growth stock you’ve never heard of.” I wasn’t kidding. The stock has gone bonkers since then, rising 89% in less than seven months.
But don’t just take my word for it.
InvestorPlace’s Jon Markman, a former hedge fund manager and the editor of both Trader’s Advantage and CounterPoint Options, picked AMBA stock for the Best Stocks for 2015 competition, our annual stock-picking competition. He’s currently sitting in first (out of 10), with his pick up more than 80%.
I still believe Ambarella is the best growth stock out there. Only now, I’m sure you’ve heard of it.
As of this writing, John Divine was long Jan 2016 $25 AMBA call options. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
