While Ambarella, Inc. (NASDAQ:AMBA) might not have the largest market cap around , it received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$64.07 at one point, and dropping to the lows of US$50.18. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Ambarella's current trading price of US$53.35 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let's take a look at Ambarella's outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
Is Ambarella Still Cheap?
Great news for investors – Ambarella is still trading at a fairly cheap price. Our valuation model shows that the intrinsic value for the stock is $73.19, but it is currently trading at US$53.35 on the share market, meaning that there is still an opportunity to buy now. Although, there may be another chance to buy again in the future. This is because Ambarella's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will Ambarella generate?
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. With profit expected to grow by a double-digit 13% over the next couple of years, the outlook is positive for Ambarella. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What This Means For You
Are you a shareholder? Since AMBA is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. With an optimistic outlook on the horizon, it seems like this growth has not yet been fully factored into the share price. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you've been keeping an eye on AMBA for a while, now might be the time to enter the stock. Its prosperous future outlook isn't fully reflected in the current share price yet, which means it's not too late to buy AMBA. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed buy.
So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. Every company has risks, and we've spotted 3 warning signs for Ambarella you should know about.
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.
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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.