In today’s piece, we will be going down memory lane as we revisit the options of Ambarella Inc. (NASDAQ:AMBA). Ambarella with its market capitalization of $2.26B is a developer of semiconductor processing solutions for video that enable high-definition (HD), video capture, sharing and display. The Company combines its processor design capabilities with its video and image processing, algorithms and software to provide a technology platform.
I have a soft spot for Ambarella because it was the very first stock that I covered on Daily Option Alerts in 2015. I wrote about trading AMBA options in a January 5 post titled “Starting 2015 On A Profitable Note With AMBA Options”. In that post, I talked about how the AMBA call options that I recommended in September 2014 had soared by an unbelievable 190.28% and stock of Ambarella have climbed 23.80% in three months.
I then provided new AMBA coverage in which I recommended buying the AMBA May 2015 55.000 call (AMBA150515C00055000) at an asking price of $5.40.
Consistently Incredible Performance in 3 Months
When I wrote that January piece, the shares of Ambarella were trading around $52 per share and the AMBA call options that I recommended had an asking price of $5.40. As at market close yesterday, the shares of Ambarella closed with 4.67% gains at $75.37 after it had reached a new 52-week high of $77.39 on March 31. Yesterday’s closing price marks a 44.94% increase after three months. The AMBA May 2015 contract that I recommended closed yesterday’s session at an asking price of $21 to mark an unbelievable 288.88% gains after 3 months.
If you had bought the aforementioned AMBA call options on my recommendation, I am sure that you’ll be smiling to the banks now. I recommend selling to close that contract now that it is in the money as its expiry date draws near. If you are new to the AMBA party, you might want to wait for new AMBA recommendation that will be given at the end of this piece.
Can the Uptrend Continue?
Many people would attribute the rally to the impressive Q4 2015 results that Ambarella posted on March 3; nonetheless, the stock has kept the uptrend intact for two months after its earnings release. Ambarella has consistently beaten estimates in the nine of the 10 quarters after its IPO. In fact, the company has delivered an average positive surprise of 37.21% in the last four quarters.
It might also interest you to know that Ambarella operates in an industry (semiconductors) with decent growth momentum and that Ambarella is strategically positioned for growth in this industry. The Semiconductor space has a Zacks Industry Rank of 23 out more than 250 industries – this suggests that the prospects of growth in the semiconductor industry are enormous.
In addition, Ambarella has positive analyst vibes that saw the current quarter estimates being raised from $0.36 per share to $0.44 per share. The current year estimates have also been increased from $1.62 per share to $1.67 per share. The expected EPS of $0.44 per share in the current quarter marks a 158.82% year-over-year increase and we can expect the stock to soar when Ambarrella releases earnings in June.
How to Trade AMBA Options
I have strong optimism about the prospects of Ambarella and I recommend buying AMBA call options. A glance at the one-year chart of Ambarella shows that the stock has established a firm support at the 50-day moving average of $68.54, which is higher than the 100-day MA and 200-day MA of $61.43 and $50.03 – this signals an uptrend in AMBA. You should consider buying the AMBA Aug 2015 70.000 call (AMBA150821C00070000) at an asking price of $10.50. I effectively have an $80 price target on Ambarella with this contract.
— Daily Option Alerts