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Ambarella (AMBA - Free Report) is a Zacks Rank #5 (Strong Sell) despite beating the number in the most recent earnings release. Chip stocks have had a very difficult time over the least few years. Let’s look at why this stock is a Zacks Rank #5 (Strong Sell) and in this Bear of the Day article.
Description
Headquartered in Santa Clara, CA, Ambarella Inc. develops video compression and image processing semiconductors, which enables high-definition or HD video capture, share and display. Ambarella’s system-on-a-chip (SoC) designs integrates HD video processing, image processing, audio processing, and system functions onto a single chip, which helps in delivering exceptional video and image quality at high compression rates, differentiated functionality and low power consumption.
Earnings History
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
In the case of AMBA, I see four straight beats of the Zacks Consensus Estimate. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.
The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.
Earnings Estimates
The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For AMBA I see annual estimates moving lower.
The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is mixed for those numbers.
The current year 2022 consensus number has dropped from $1.89 to $1.74.
The next year has dropped from $2.44 to $2.25 over the last 60 days.
Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).
It should be noted that a majority of stocks in the Zacks universe are seeing positive earnings estimate revisions. That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).
Image: Bigstock
Bear Of The Day: Ambarella (AMBA)
Ambarella (AMBA - Free Report) is a Zacks Rank #5 (Strong Sell) despite beating the number in the most recent earnings release. Chip stocks have had a very difficult time over the least few years. Let’s look at why this stock is a Zacks Rank #5 (Strong Sell) and in this Bear of the Day article.
Description
Headquartered in Santa Clara, CA, Ambarella Inc. develops video compression and image processing semiconductors, which enables high-definition or HD video capture, share and display. Ambarella’s system-on-a-chip (SoC) designs integrates HD video processing, image processing, audio processing, and system functions onto a single chip, which helps in delivering exceptional video and image quality at high compression rates, differentiated functionality and low power consumption.
Earnings History
When I look at a stock, the first thing I do is look to see if the company is beating the number. This tells me right away where the market’s expectations have been for the company and how management has communicated to the market. A stock that consistently beats has management communicating expectations to Wall Street that can be achieved. That is what you want to see.
In the case of AMBA, I see four straight beats of the Zacks Consensus Estimate. This alone does not make the stock a Zacks Rank #1 (Strong Buy) and it doesn’t make it a Zacks Rank #5 (Strong Sell) either.
The Zacks Rank does care about the earnings history, but it is much more heavily influenced by the movement of earnings estimates.
Earnings Estimates
The Zacks Rank tells us which stocks are seeing earnings estimates move higher or in this case lower. For AMBA I see annual estimates moving lower.
The Zacks Rank is more heavily influenced by the move in the annual numbers, and the movement is mixed for those numbers.
The current year 2022 consensus number has dropped from $1.89 to $1.74.
The next year has dropped from $2.44 to $2.25 over the last 60 days.
Negative movement in earnings estimates like that is why this stock is a Zacks Rank #5 (Strong Sell).
It should be noted that a majority of stocks in the Zacks universe are seeing positive earnings estimate revisions. That means that the stocks that are seeing small but negative earnings estimate revisions are falling to a Zacks Rank #5 (Strong Sell).
Chart
Ambarella, Inc. Price and Consensus
Ambarella, Inc. price-consensus-chart | Ambarella, Inc. Quote