Today the company's chips can be found in Security Systems, Automotive Cameras, Flying Cameras, Sports and Virtual Reality Cameras, Wearable Cameras, and Broadcast Infrastructure Solutions. Tomorrow the video chips may be found on systems that haven't even been invented yet. The world looks broad and vast for Ambarella.
Ambarella, Inc. develops semiconductor processing solutions for video that enable high-definition (HD) video capture, sharing, and display worldwide. The company's system-on-a-chip designs integrated HD video processing, image processing, audio processing, and system functions onto a single chip for delivering video and image quality, differentiated functionality, and low power consumption. Its solutions enable the creation of video content for wearable sports cameras, automotive aftermarket cameras, and professional and consumer Internet Protocol (IP) security cameras, as well as cameras incorporated into unmanned aerial vehicles in the camera market; and manage IP video traffic, broadcast encoding and transcoding, and IP video delivery applications in the infrastructure market. The company sells its solutions to original design manufacturers and original equipment manufacturers through its direct sales force and logistics providers. Ambarella, Inc. was founded in 2004 and is headquartered in Santa Clara, California.
(Summary) (Company) (Chart)
5 February 2016
1yr Target $71.67
Payout Ratio ---
1yr Cap Gain 38.94%
1yr Tot Return 38.94%
EPS (ttm) $1.30
EPS next yr $2.86
Forward P/E 18.03
EPS next 5yr 16.33%
1yr Price Support $46.70
Market Cap $1.71 Bil
Revenues $290.80 Mil
Earnings $44.60 Mil
Profit Margin 15.33%
Quick Ratio 7.00
Current Ratio 7.40
1yr RevGR 44.94%
3yr RevGR 37.29%
5yr RevGR ---
1yr EarnGR 44.58%
3yr EarnGR 55.13%
5yr EarnGR %
1yr DivGR ---
3yr DivGR ---
5yr DivGR ---
Ambarella is the leading developer of semiconductor processing solutions for video that enable high-definition, or HD, video capture, sharing and display. A device that captures video includes four primary components: a lens, an image sensor, a video processor and storage memory. The video processor is the most complex of these four primary components as it converts raw video input into a format that can be stored and distributed efficiently. Ambarella combines their processor design capabilities with their expertise in video and image processing, algorithms and software to provide a technology platform that is designed to be easily scalable across multiple applications in a variety of markets and enable rapid and efficient product development. The company's system-on-a-chip, or SoC, fully integrates HD video processing, image processing, audio processing and system functions onto a single chip, delivering exceptional video and image quality at high compression rates, differentiated functionality and low power consumption.
The inherent flexibility of this technology enables the company to deliver solutions for numerous applications in multiple markets. In the camera market, their platform enables the creation of high-quality video content in wearable cameras, automotive aftermarket cameras, professional and consumer Internet Protocol, or IP, security cameras, and cameras incorporated into unmanned aerial vehicles, also referred to as UAVs, drones or flying cameras. Their revenue growth over the last three years has been driven primarily by specialized video and image capture devices such as wearable sports cameras, automotive aftermarket cameras and IP security cameras. In the infrastructure market, their solutions efficiently manage IP video traffic, broadcast encoding and transcoding and IP video delivery applications.
Ambarella initially focused their technology platform on the infrastructure market, where they were able to differentiate solutions for broadcast customers based on high performance, low power consumption, transmission and storage efficiency and small form factor. Leveraging these same capabilities, they then designed high-performance solutions for the camera market. As a result of the advantages of these solutions, the company became a leading provider of video processing solutions for cameras that capture both HD video and high-resolution still images simultaneously. In addition, they have released SoC solutions that combine high-resolution video and image capture capabilities with advanced networking, connectivity and application processing functionalities.
Ambarella sells their solutions to leading original design manufacturers, or ODMs, and original equipment manufacturers, or OEMs, globally. In the camera market, the company's video processing solutions are designed into products from leading OEMs including Axis Communications AB, Carcam Electronics Technology Co., Ltd., Dahua Technology Co., Ltd., Dajiang Innovation Technology Inc., Garmin Ltd., GoPro Inc., Hikvision Digital Technology Co., Qihoo 360 Technology Co. Ltd., Robert Bosch GmbH and affiliated entities, and XiaoYi Technology Co., Ltd., who source Ambarella's solutions from ODMs including Asia Optical Co. Inc., Chicony Electronics Co., Ltd., Jabil Circuit, Inc., San Jet Technology Corp., Sercomm Corporation, and Sky Light Digital Ltd. In the infrastructure market, the company's solutions are designed into products from leading OEMs including Harmonic Inc., Motorola Mobility, Inc. (owned by Arris Group, Inc.) and Telefonaktiebolaget LM Ericsson, who source Ambarella's solutions from leading ODMs such as Plexus Corp. The company intends to continue to build and strengthen their relationships with existing customers and also diversify their customer base.
Ambarella employs a fabless manufacturing strategy and is currently shipping the majority of their solutions in the 45, 32 and 28 nanometer process nodes. As of January 31, 2016, the company had 640 employees worldwide, approximately 72% of whom are in research and development.
For our fiscal years ended January 31, 2016, 2015 and 2014, Ambarella recorded revenue of $316.4 million, $218.3 million and $157.6 million, respectively, and net income of $76.5 million, $50.6 million and $25.7 million, respectively. The company has generated net income in each quarter beginning with the first quarter of fiscal year 2010, and they have generated cash from operations in each of fiscal years starting from 2009.
Video traffic is growing at a significant rate. The market trends that are fundamentally impacting video content creation and distribution include the following:
- Increasing Number of Video Capture Devices . Traditionally, HD video has been captured using large, power intensive and expensive dedicated devices. Recent improvements in HD video capture quality, device size and cost have allowed video capture functionality to be incorporated into a broad range of devices. Today, smartphones, tablets, wearable cameras, automotive aftermarket cameras, IP security cameras and UAVs, are increasingly including both HD video capture and high-quality still image capture. In addition to the significant growth in the number of devices, new applications are emerging for video capture devices. Very small HD cameras, or wearable cameras, incorporating connectivity to a smart phone or internet are being developed for new applications such as law enforcement, personal security and social media. In some regions of the world, such as China, Russia, South Korea and Taiwan, video capture devices are being added as aftermarket accessories to automobiles and connected to on- board recording systems to capture video in the event of an incident, which assists the legal and insurance claims process following an accident.
- Growing User-Generated Content . Historically, most video content was created by media companies, professional studios and large broadcasters that possessed the equipment, expertise and other resources necessary to produce and distribute such programming. However, with the proliferation of low-cost digital video devices and greater penetration of broadband connectivity, individuals are playing a greater role in content creation and distribution. Websites such as YouTube and Facebook have enabled an effective new channel to widely distribute, store and display video and other rich media. In addition to user-created videos, other user-generated content such as video conferencing and video instant messaging through services provided by Apple, Inc., Google Inc. and Skype, among others, are becoming increasingly popular.
- Broadband Penetration Enabling the Proliferation of the Video Cloud . The adoption of high-speed broadband and the proliferation of connected devices such as smartphones, tablets, laptops, desktop computers and connected televisions have allowed consumers to more easily download and share IP video accessed upon demand through the video cloud. The video cloud has led to new business models based on personal content such as streaming video provided by services like YouTube. Additionally, consumers are leveraging the video cloud for security by utilizing an IP camera and cloud infrastructure to watch live HD video streaming on any web connected device. This video cloud application has enabled expansion of the connected home to include intelligent IP surveillance systems that detect activity and then stream encrypted HD video through secure servers and alert end users.
- Advancements in Display Technology . The increasing proliferation of HD displays in television and in mobile connected devices such as laptops, smartphones and tablets is accelerating HD video content growth. This trend highlights the new paradigm of escalating consumer expectations of video quality, such that video is comparable to high-resolution still images, which drove the transition from standard definition to HD, and will drive the transition to ultra high-definition, or UHD. UHD is commonly referred to as 4K video, which supports up to 4096x2160 pixels per frame, more than four times greater resolution than the current Full HD standard, which supports up to 1920x1080 pixels per frame.
- Requirement for Efficient Video Compression . HD video is increasingly a requirement for consumer video cameras, IP security cameras and for the broadcast of television programs, whether via cable, satellite or IP networks. Uncompressed HD video requires massive amounts of digital data to represent it, necessitating the need for video compression technology to reduce da ta rates for storage or for transmission of video over networks with limited bandwidth. In broadcast television, an upgrade of networks from H.264 video compression technology to the new high efficiency video coding, or HEVC, video compression technology w ould support the transition of consumers to 4K video. In consumer cameras, the efficiency of the encoding has a significant impact on video quality, recording time and battery life. In IP security cameras, encoding efficiency is important for realizing the highest image quality possible over bandwidth-limited networks, and for minimizing the costs of cloud-based storage of video content. Additionally, the ability to actively adapt the encoding bit-rate based on changing network bandwidth availability provid es the highest possible video quality and enables network traffic management. As consumers increasingly view video on smartphones and tablets, in addition to traditional televisions and PCs, the ability to trans-rate video content in real time to the vario us resolutions and bit-rates supported by smartphones or tablets is essential.
- Higher Definition and Higher Frame Rates . The demand for enhanced video resolution has been increasing in both the camera and infrastructure markets. Consumers expect video quality to be closer to high-resolution still images, which continues to drive the transition from standard definition to Full HD and beyond. Similarly, as new display technologies enable higher resolutions and higher frame rates, we believe consumer demand will drive the requirement for UHD or 4K video capture and transmission. In the market for wearable sports cameras, for example, resolution and frame rate have been the primary factor in consumers’ purchasing decisions. In the infrastructure market, consumer demand for viewing Full HD content has prompted broadcasters to seek high-performance solutions.
- Ability to Capture High-Quality Still Images and Video . Historically, consumers have purchased devices that either provide high-quality image capture or record high-quality video. This was the result of consumer preference, as reasonably priced and sized devices would provide only one of those attributes. However, as a result of technological improvements, consumer devices that deliver both attributes have proliferated to the point that a pure video capture device or still image capture device is becoming uncommon. Increasingly, devices are able to simultaneously capture HD video and high-quality still images without adversely impacting the quality of either. We believe devices that can capture Full HD video while encoding a second mobile resolution video for uploading to the Internet or streaming over a Wi-Fi network will expand consumer demand for specialized video capture devices. Additionally advanced low-light processing including high dynamic range and high-ISO processing will continue to improve image quality even in challenging lighting conditions.
- Connectivity . Integrated wireless capability using wireless links such as Bluetooth and Wi-Fi is becoming an increasingly prevalent feature across many classes of video capture devices. Consumers want to watch, control and capture real-time video using their smartphones as the remote control and viewer for wirelessly enabled wearable and sports cameras. Additionally, rather than storing images and video to local media and transferring to a computer later, consumers are demanding the ability to wirelessly transfer and share their video content to websites such as YouTube, Facebook and other online media albums. In video security applications, connectivity to cloud services allows users to monitor surveillance video in real-time on their smartphones or tablets. The storage of video in the cloud also provides protection against theft of the video content and enables users the capability to play back the stored video.
- Ability to Deliver Feature-Rich Video . The addition of de-warping capability allows cameras to utilize a wide angle or “fish eye” lens to cover a wide viewing area. In security applications this capability can allow a single camera to replace multiple cameras and may also eliminate the need for mechanical pan-tilt-zoom in the cameras. In automotive markets, the ability to combine and display images captured by multiple cameras can allow the automotive camera recorder to capture and display images from the front, rear and sides of the car. Our wide dynamic range, or WDR, and high dynamic range, or HDR, processing capabilities provide greater dynamic range between the lightest and darkest areas of an image, permitting captured still images to reveal details that would otherwise be lost against a bright background. Our new hardware-accelerated three-dimensional image stabilization engine with rolling shutter correction enables stable video recording during high-motion conditions. In flying camera applications this potentially eliminates the need for a mechanical gimbal system.
- Computer Vision. Computer vision represents the field of methods for acquiring, processing, analyzing, and understanding images and high- dimensional data from the real world in order to automate and integrate a wide range of processes. Computer vision is becoming increasingly important for the development of int elligent video cameras. In the IP security camera market, computer vision can be used for various functions including motion detection to trigger alarms, and the counting and tracking of people. The application of computer vision may be also be used to hel p control the video encoding process to reduce video bitrates and maximize network efficiency. In the automotive market, the application of computer vision for advanced driver assistance systems, or ADAS, is increasingly being used to help drivers. Automot ive analytics functions include lane detection warning system (LDWS) and forward collision warning (FCW). In general, powerful CPUs and dedicated computer vision hardware are required to support the advanced analytics algorithms in video cameras.
- Transcoding . The ability to decode and simultaneously re-encode high-quality video streams in multiple formats, which is commonly referred to as transcoding, using dense, small form factor and power-efficient hardware is a critical requirement for content providers and the video cloud. Given the differing connection speeds and capacities in current communication networks, broadcasters must be able to deliver video to consumers at varying bit-rate and quality levels. Furthermore, the significant increase in the number and types of devices capable of displaying video, from HD televisions to smartphones, requires broadcasters and other distributors to have the capability to provide video content in multiple formats and source resolutions.
My Path Forward
Companies not paying a dividend usually don't end up on my radar and Ambarella hasn't paid a dividend yet. What put it on my radar was it's revenue and earnings increases. They are incredible. Then when sales of the GoPro stumbled in 2016 the stock fell from around $120 per share to nearly $40 per share. In late 2016 the company was "discovered" again and the stock was run up again but this time only to about $75 per share. Recently it's fallen again but I think the smart money will enter before it falls to $40 again. At $51 per share we may be close to seeing a bottom again. Or it may fall to support near $40 again. But personally I'm not taking that chance. I intend to start a small position here and add to that position on any pullback. I want to be a part of this company's future and entering here works for me. This will be a long term hold and a bet on the future of all of the industries that this company supports.