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Category: Stock Market and Ambarella
Date: 2 September 2019 Stock Price: $55.87 We take a look at the 2nd quarter earnings report of their 2020 fiscal year of Ambarella, a leading developer of low-power and high-resolution human and computer vision solutions
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About Ambarella
Ambarella’s products are used in a wide variety of human and computer vision applications, including video security, advanced driver assistance systems (ADAS), electronic mirror, drive recorder, driver/cabin monitoring, autonomous driving, and robotic applications. Ambarella’s low-power SoCs offer high-resolution video compression, advanced image processing, and powerful deep neural network processing to enable intelligent cameras to extract valuable data from high-resolution video streams.
Financial overview of Ambarella's latest earnings report
The numbers highlighted by management:
The numbers we are interested in (for the quarter):
- Revenue for the second quarter of fiscal 2020 was $56.4 million, down 9.7% from $62.5 million in the same period in fiscal 2019. For the six months ended July 31, 2019, revenue was $103.6 million, down 13.2% from $119.4 million for the six months ended July 31, 2018.
- Gross margin under U.S. generally accepted accounting principles (GAAP) for the second quarter of fiscal 2020 was 57.5%, compared with 60.8% for the same period in fiscal 2019. For the six months ended July 31, 2019, GAAP gross margin was 58.2%, compared with 61.1% for the six months ended July 31, 2018.
- GAAP net loss for the second quarter of fiscal 2020 was $10.2 million, or loss per diluted ordinary share of $0.31, compared with GAAP net loss of $6.9 million, or loss per diluted ordinary share of $0.21, for the same period in fiscal 2019. GAAP net loss for the six months ended July 31, 2019 was $27.5 million, or loss per diluted ordinary share of $0.84. This compares with GAAP net loss of $16.9 million, or loss per diluted ordinary share of $0.51, for the six months ended July 31, 2018.
The numbers we are interested in (for the quarter):
- Revenue: $56.410 million ( $62.474 millon for the same quarter of the previous year)
- Cost of revenue: $23.973 million (down from $ 24.461 million for the same quarter of the previous year)
- Net loss: -$10.191 million (up from -$6.877 million for the same quarter of the previous year)
- Diluted earnings per share: -$0.31 (increased loss from - $0.21 for the same quarter of the previous year)
- Diluted number of shares outstanding: 32,860,974
- Cash and cash equivalents: $222.693 million
- Cash and cash equivalents per share: $6.77
- Cash and cash equivalents makes up 45.4% of total assets
- Accounts receivable, net: $27.940 million
- Accounts receivable as 5.69% of total assets
- Inventories: $17.376 million
- Inventories makes up 3.53% of total assets
- Total shareholders’ equity: $428.461 million
- Total shareholders equity per share: $13.04
Ambarella's management commentary on the results and earnings guidance
SANTA CLARA, Calif., Aug. 29, 2019 (GLOBE NEWSWIRE) -- Ambarella, Inc. (NASDAQ: AMBA), a leading developer of low-power and high-resolution human and computer vision solutions, today announced financial results for its second quarter of fiscal year 2020 ended July 31, 2019.
“Our confidence in our fiscal year 2020 outlook has increased, despite the geopolitical uncertainty,” said Fermi Wang, President and CEO. “Most importantly, we continue to demonstrate strong progress on our strategy to transform from a pure video processing company to an artificial intelligence (“AI”) video company. During the second quarter, we commenced mass production CV system-on-a-chip (“SoC”) shipments into the automotive market and CV25 became our second CV SoC to generate mass production revenue. We continue to have strong confidence in the three waves of CV revenue we have previously described.”
Stock Repurchase
In the second quarter of fiscal year 2020, the company did not repurchase shares under a $50.0 million repurchase program through June 30, 2020.
“Our confidence in our fiscal year 2020 outlook has increased, despite the geopolitical uncertainty,” said Fermi Wang, President and CEO. “Most importantly, we continue to demonstrate strong progress on our strategy to transform from a pure video processing company to an artificial intelligence (“AI”) video company. During the second quarter, we commenced mass production CV system-on-a-chip (“SoC”) shipments into the automotive market and CV25 became our second CV SoC to generate mass production revenue. We continue to have strong confidence in the three waves of CV revenue we have previously described.”
Stock Repurchase
In the second quarter of fiscal year 2020, the company did not repurchase shares under a $50.0 million repurchase program through June 30, 2020.
Ambarella's (NASDAQ: AMBA) stock price history
The image below shows the stock price history of Ambarella over the last 5 years. While there has been significant periods of upwards momentum in the stock price it has been matched with equally significant downturns in the stock price. The end result being the group's stock price has basically moved sideways over the last 5 years. And the current stock price is making new highs for the last 52 weeks.
Ambarella (NASDAQ: AMBA) latest stock valuation
So based on the group's results what are their stock worth? It is notoriously hard to value a stock that is making a loss and not paying dividends. As most stock valuation methods require these as input variables. One can look at the stockholders equity per share as a base case of what the company is worth if it sold all its assets and paid all its outstanding debt and distributed the rest to equity holders. This will value the stock at $13 a share. Well below the current price. Until the group can start generating a profit we will stick to the believe that one cannot value it at more than their shareholders equity per share. Thus our valuation will be $13 for the group's stock at this point in time.