Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Can Ambarella (AMBA) Make Money from Self-Driving Cars?

Ambarella Inc. (NASDAQ: AMBA) could be the best stock to buy to make money from autonomous vehicles?

To explain,  designs and manufactures the processors and chips that help autonomous vehicles see and navigate. Ambarella’s specialties include high-resolution imaging and neural network processing.

Ambarella’s processors can run smart electronic mirrors, drive recorders, fleet management solutions, ADAS (Advanced Driver Assistance System) cameras, and more. Other uses for Ambarella technology include broadcast television, high-definition video, dash cameras, drones, wearable cameras for police, security cameras, and consumer security devices including NEST.

 Ambarella claims its technology can enable fully autonomous vehicles. Major fields at Ambarella include AI processors, Security IP cameras, sports cameras, drone cameras, and more.*

How Ambarella helps Machines See

Ambarella’s signature products include low power cameras, stereovision, UHD Image quality and CVflow. For instance, Ambrrealla designs its CVflow chip architecture for computer vision algorithms. CVflow functions as a dedicated vision processing engine with high-level algorithm description. Hence, CVflow helps autonomous cars, robots, drones, and other machines “see.”

Ambarella claims its cameras are five times as efficient as competitors’ products. Ambarella’s Stereovision processing transforms 2D images into 3D images. Hence, Stereovision can generate 3D images from a low-power camera.

Specific Ambarella products for vehicles include automotive vehicle recorders, 360 surround view systems with parking assist, driver monitoring systems, in-cabin monitoring systems, front ADAS cameras, and smart electronic mirrors.

Ambrabella and Amazon

Ambrabella (AMBA) is one of two hardware makers supporting Amazon’s AWS Panorama machine learning Appliance and Software Development Kit (SDK).

The AWS Panorama adds computer vision (CV) to digital cameras, a press release claims. Amazon Web Services (AWS) claims Panorama allows platforms to make predictions using CV images from digital cameras.

AWS will base two products on Panorama. The products are the AWS Panorama Appliance and the AWS Panorama Device SDK.

“The AWS Panorama Appliance is a hardware device that allows you to add CV to your internet protocol (IP) cameras that weren’t built to accommodate computer vision, Amazon Web Services claims. The “AWS Panorama Appliance turns your existing cameras into smart cameras that can run CV models on multiple concurrent video streams.”

Therefore, factory managers could monitor everything that happens on the factory floor using the AWS Panorama Appliance without replacing their cameras.

“The AWS Panorama Device SDK is a software kit that enables third-party manufacturers to build new cameras that run more meaningful CV models at the edge for tasks like object detection or activity recognition,” an AWS press release claims. “AWS Panorama-compatible cameras work out of the box with AWS machine learning services.”

For instance, security officers could use the AWS Panorama Device SDK and AWS Panorama-compatible cameras in an airport to spot people with weapons. Likewise, police could use AWS Panorama-compatible cameras to spot people who are not wearing masks or crime suspects.

Ambarella (NASDAQ: AMBA) and NVIDIA (NVDA) are partnering with Amazon (AMZN) to produce processors for the AWS Panorama Appliances. Therefore, Ambarella could enter an enormous new market.

Mr. Market Loves Ambarella

Many investors love Ambarella (AMBA) because its stock is cheaper than NVIDIA’s (NVDA). For example, Mr. Market paid $544.27 for NVIDIA and $90.47 for AMBA on 7 December 2020.

In 2020, Ambarella’s share price rose from $62.76 on 2 January to $89.18 on 3 December to $90.49 on 7 December 2020. Hence, Ambarella is a growth stock that Mr. Market loves.

However, I do not think Ambarella’s financials justify the price Mr. Market pays for it.

Is Ambarella making money?

In fact, Ambarella makes little money. For instance, Ambarella reported quarterly revenues of $50.11 million 31 July 2020.

Interestingly, Ambarella reported a $30.96 million quarterly gross profit on those revenues. Ambarella loses money, it reported a quarterly operating loss of -$15.69 million on 31 July 2020.

Plus, Ambarella reported a negative quarterly operating cash flow of -$2.42 million on 31 July 2020. Additionally, Ambarella reported a negative quarterly ending cash flow of -$15.94 million on 31 July 2020.

Ambrealla loses money and burns cash. Strangely, Ambarella had $410.71 million in cash and short-term investments on 31 July 2020.

Moreover, Ambarella has little value. For instance, Ambarella had total assets of $533.40 million on 31 July 2020.

In the final analysis, I think Ambarella is a terrible stock that loses money and offers scant value. I advise investors to avoid Ambarella (AMBA) and investigate chip makers that make money such as NVIDIA (NVDA).