The Ambarella stock price has climbed 81% in 2015, compared to a gain of just 1.1% for the Dow Jones Industrial Average in the same time.
And it climbed 1.2% higher afterhours today after another encouraging earnings report.
Since Money Morning's Defense and Tech Specialist Michael A. Robinson first recommended Ambarella Inc. (Nasdaq: AMBA) stock to readers in August 2013, AMBA stock is up nearly 415%. We recommended AMBA again on April 29. Since then, it's up another 27%.
It's still not too late for investors who missed those gains on Ambarella stock.
Ambarella stock is still one of the best plays in the tech market. Here's why we're still bullish...
Ambarella Stock's Newest Buy Signals
Ambarella is a video compression and processing-technology company. It is best known for developing the technology behind GoPro Inc.'s (Nasdaq: GPRO) wearable cameras. AMBA is a small-cap stock with a market cap of just $3 billion.
After the bell on Tuesday, the company reported earnings per share (EPS) of $0.71 on revenue of $71 million. Analysts had predicted EPS of $0.59 on revenue of $67.36 million.
Earnings were up 184%, while revenue climbed 73.5%.
Gross margins for the quarter were 64.7%, compared to 62.5% last year.
Today's report continued the company's strong earnings track record. In the previous four quarters, AMBA beat earnings estimates by an average of 29%.
But the earnings report wasn't the only "Buy" signal we've received for Ambarella stock this week.
On Monday, two investing firms raised their price targets on AMBA stock. Barrington reiterated its "Outperform" rating on Ambarella stock and raised its target 29% to $97. Finally, Pacific Crest raised its target 23% to $96.
AMBA opened Tuesday at $91.44. So hitting those price targets would be an additional gain of 5% and 6.1% from today's price.
Another thing boosting AMBA stock is its partnership with Google Inc. (Nasdaq: GOOG, GOOGL).
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In November, it announced a partnership that centered on Google's "Helpouts" service app. "Helpouts" will let teachers, counselors, doctors, home repair specialists, personal trainers, and others offer their paid or free expertise via real-time online video. Google is tapping Ambarella to provide the chips.
"For a small company like Ambarella, hooking up with a heavyweight like Google is incredibly bullish," Robinson said at the time.
But it isn't the partnership with Google or the new price targets that will truly drive Ambarella stock in 2015 - it's this...
Why Ambarella Stock Is Still a Buy Now
Ambarella also supplies chips that are used in rear-view backup cameras that come in many cars. The "connected car" is a major trend behind the current U.S. auto boom and will continue to be a catalyst for AMBA stock.
"Beginning in 2018, new federal rules mandate that all new cars sold in the United States must have backup cameras," Robinson said. "Over the past 15 years, the U.S. has averaged 15.5 million new vehicle sales a year - and that number is projected to rise 2.6% to reach 17 million new vehicle sales in 2015."
Ambarella's chips are also used in ultra-high-definition televisions (UHDTV).
"Ambarella is one of the few chips firms out there with products optimized for the emerging field of UHDTV, which offers resolution four times that of traditional high-def sets," Robinson said. "The Consumer Electronics Association trade group estimates that Americans will be buying 1.43 million UHDTV sets, or roughly 5% of TVs sold nationally, 2016. That's a 60-fold increase from 2013, when UHDTVs debuted."
More analysts join Robinson's bullish outlook on AMBA stock. Analysts at Zacks have AMBA rated as a "Strong Buy." Investor's Business Daily rated Ambarella stock as the top pick in its group.
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