Analyzing Ambarella (NASDAQ:AMBA) and Applied Materials (NASDAQ:AMAT)

Ambarella (NASDAQ:AMBA) and Applied Materials (NASDAQ:AMAT) are both computer and technology companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, risk, analyst recommendations, earnings, institutional ownership, valuation and dividends.

Institutional & Insider Ownership

82.1% of Ambarella shares are owned by institutional investors. Comparatively, 80.6% of Applied Materials shares are owned by institutional investors. 5.7% of Ambarella shares are owned by insiders. Comparatively, 0.2% of Applied Materials shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility and Risk

Ambarella has a beta of 1.66, indicating that its share price is 66% more volatile than the S&P 500. Comparatively, Applied Materials has a beta of 1.53, indicating that its share price is 53% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and price targets for Ambarella and Applied Materials, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ambarella	0	4	8	0	2.67
Applied Materials	1	6	15	0	2.64

Ambarella currently has a consensus price target of $86.67, suggesting a potential upside of 41.08%. Applied Materials has a consensus price target of $215.38, suggesting a potential upside of 36.26%. Given Ambarella’s stronger consensus rating and higher probable upside, equities analysts clearly believe Ambarella is more favorable than Applied Materials.

Profitability

This table compares Ambarella and Applied Materials’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ambarella	-62.38%	-23.52%	-19.93%
Applied Materials	22.95%	39.50%	22.12%

Earnings and Valuation

This table compares Ambarella and Applied Materials”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ambarella	$252.47 million	10.15	-$169.42 million	($3.86)	-15.91
Applied Materials	$27.64 billion	4.65	$7.18 billion	$7.65	20.66

Applied Materials has higher revenue and earnings than Ambarella. Ambarella is trading at a lower price-to-earnings ratio than Applied Materials, indicating that it is currently the more affordable of the two stocks.

Summary

Applied Materials beats Ambarella on 8 of the 14 factors compared between the two stocks.

About Ambarella

Ambarella, Inc. develops semiconductor solutions that enable high-definition (HD) and ultra HD compression, image signal processing, and artificial intelligence processing worldwide. The company's system-on-a-chip designs integrated HD video processing, image processing, artificial intelligence computer vision algorithms, audio processing, and system functions onto a single chip for delivering video and image quality, differentiated functionality, and low power consumption. Its solutions are used in automotive cameras, such as automotive video recorders, electronic mirrors, front advanced driver assistance system camera, cabin monitoring system and driver monitoring system camera, and central domain controllers for autonomous vehicle; enterprise and public class, and home security camera; and robotics and industrial application, including identification/authentication cameras, robotic products, and sensing cameras, as well as cameras for the enterprise, home, public spaces, and consumer leisure comprising wearable body cameras, sports action cameras, social media cameras, drones for capturing aerial video or photographs, video conferencing, and virtual reality applications. The company sells its solutions to original design manufacturers and original equipment manufacturers through its direct sales force and distributors. Ambarella, Inc. was incorporated in 2004 and is headquartered in Santa Clara, California.

About Applied Materials

Applied Materials, Inc. engages in the provision of manufacturing equipment, services, and software to the semiconductor, display, and related industries. The company operates through three segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. The Semiconductor Systems segment develops, manufactures, and sells various manufacturing equipment that is used to fabricate semiconductor chips or integrated circuits. This segment also offers various technologies, including epitaxy, ion implantation, oxidation/nitridation, rapid thermal processing, physical vapor deposition, chemical vapor deposition, chemical mechanical planarization, electrochemical deposition, atomic layer deposition, etching, and selective deposition and removal, as well as metrology and inspection tools. The Applied Global Services segment provides integrated solutions to optimize equipment and fab performance and productivity comprising spares, upgrades, services, remanufactured earlier generation equipment, and factory automation software for semiconductor, display, and other products. The Display and Adjacent Markets segment offers products for manufacturing liquid crystal displays; organic light-emitting diodes; and other display technologies for TVs, monitors, laptops, personal computers, electronic tablets, smart phones, and other consumer-oriented devices. It operates in the United States, China, Korea, Taiwan, Japan, Southeast Asia, and Europe. The company was incorporated in 1967 and is headquartered in Santa Clara, California.