Ambarella (AMBA) stock rallied on Oct. 21 after takeover speculation linked Nvidia (NVD) to the Nasdaq-listed fabless semiconductor design company. The artificial intelligence (AI) darling could be the previously unidentified third potential bidder interested in buying AMBA, a Betaville alert suggested on Wednesday.
Despite today’s gain, Ambarella shares are down about 30% versus their year-to-date high.
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www.barchart.comSignificance of Nvidia News for Ambarella Stock
Nvidia is rumored to be evaluating Ambarella with Goldman Sachs advising on a possible transaction; other potential suitors include NXP Semiconductors (NXPI) and Qualcomm (QCOM).
Ambarella stock jumped following the Betaville alert today primarily because additional credible buyout interest could improve the overall chances of a sale and support a higher deal price.
AMBA’s low-power AI chips serve cameras, vehicles, and emerging robotic applications, providing a potential strategic rationale for an acquisition. That makes it valuable to a buyer seeking broader exposure to artificial intelligence running inside physical devices.
Barchart currently holds a “56% SELL” opinion on AMBA stock, indicating technical momentum does not particularly favor further gains in the near term.
What Else Makes AMBA Shares Attractive
Ambarella stock offers investors significant exposure to edge AI at a rather compelling price-to-sales (P/S) multiple of about 7x.
Record artificial intelligence-driven revenue saw the company’s adjusted earnings grow roughly 20% on a year-over-year basis to $0.18 per share in its latest reported quarter.
Plus, management’s guidance for at least $115 million in Q3 revenue suggests continued sequential acceleration on the back of X7 AI accelerator and distribution initiatives that provide additional avenues to reach customers.
In short, the broader investment thesis for AMBA is rooted in more than acquisition speculation only. That said, Ambarella does not currently pay a dividend, though.
Wall Street Remains Bullish on Ambarella
Wall Street remains bullish as ever on AMBA shares for the next 12 months. According to Barchart, the consensus rating on the edge AI specialist sits at “Moderate Buy,” with the mean price target of nearly $90 indicating potential upside of about 35% from current levels.
www.barchart.com On the date of publication, Wajeeh Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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