Zebra Technologies Corporation

ZBRA Details

Won IoT Innovator Award for Innovation: Zebra Technologies Corporation (NASDAQ: ZBRA) is a technology company, mainly involved in building enterprise-level data capture and automatic identification solutions that provide businesses with operational visibility. As on 30 December 2020, the company’s market capitalization stood at ~$20.46 billion. On 15 December 2020, the company announced that it has won IoT Retail & Customer Experiences Innovator Award for its SmartSight™ intelligent automation solution. SmartSight offers the retail industry an innovative solution to provide real-time intelligence and insights across store operations, and it can provide 95% accuracy in identifying stockouts, misplaced products, incorrect price labels, and location and planogram compliance. The company recently selected LevaData to manage its direct materials sourcing, new product introduction, and supply risk mitigation worldwide.

Q3FY20 Result Highlights: For the September 2020 quarter, the company reported adjusted net sales of $1,134 million and an adjusted gross profit of $497 million. Notably, the sales, EBITDA margin, and earnings per share results for Q3FY20 exceeded the company’s outlook, as many enterprise customers prioritized their spending on its solutions. During the quarter, the company closed the acquisition of Reflexis, a leading provider of intelligent workforce management and task execution solutions. As at 30 September 2020, the company had cash & cash equivalents of $39 million and total debt of $1.6 billion. Net-debt-to-adjusted-EBITDA ratio stood at 1.8x.

Q3FY20 Results (Source: Company Reports)

Outlook:  For Q4FY20, the company expects its adjusted net sales to grow by 3% to 7% on pcp, as many of its customers continue to navigate through a challenging macro environment. Further, the company expects the adjusted EBITDA margin for Q4FY20 to be in the range of 21% to 22%. For the full year FY20, the company expects its free cash flow to be at least $650 million.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Month

Stock Recommendation: Over the last three months the stock has provided a return of 52% and is currently trading close to its 52-week high of $388.92. On the technical analysis front, the stock has a support level of ~$363.47 and resistance of ~$388.26. We have valued the stock using an EV/EBITDA multiple based illustrative relative valuation method and have arrived at a target price with a correction of high single-digit (in % terms). Considering the stock’s decent returns in the past three months and its current trading level, we are of the view that most of the positives are factored in at current level. Hence, we suggest investors to wait for better entry levels and give an “Expensive” rating for the stock at the closing price of $383.75, up by 1.51%, as on 30 December 2020.

ZBRA Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Ambarella, Inc.

AMBA Details

Announces Collaboration with emotion3D: Ambarella, Inc. (NASDAQ: AMBA) is a leading-edge AI processing company that makes cameras smarter by extracting valuable data from high-resolution video streams. As on 29 December 2020, the company’s market capitalization stood at $3.14 billion. On 9 December 2020, the company announced that it will collaborate with emotion3D, a pioneer in camera-based in-cabin monitoring software solutions, to provide platform-optimized driver monitoring (DMS) and occupant monitoring (OMS) solutions to automotive suppliers and Original Equipment Manufacturers (OEMs). The combination of emotion3D’s flexible software stack and the company’s CV25AQ CVflow AI vision processor will enhance the performance of Tier-1s and OEMs.

Q3FY21 Result Highlights: For the quarter ended 31 October 2020 (Q3FY21), the company reported total revenue of $56.1 million, down by 17.4% on the previous corresponding period (pcp). Further, the company reported a GAAP net loss of $17.1 million, compared with a GAAP net loss of $4.3 million in pcp. As at 31 October 2020, the company had cash and cash equivalent of $225.5 million.

Q3FY20 Results (Source: Company Reports)

Outlook: For Q4FY21, the company expects its revenue to be in the range of $56.0 million and $60.0 million and non-GAAP gross margin to be between 59.0% and 61.0%. The operating expenses for Q1FY21 are expected to be between $31.0 million and $33.0 million.

Valuation Methodology: P/BV Multiple Based Relative Valuation (Illustrative)

P/BV Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Month

Stock Recommendation: The stock of AMBA has provided a return of 77.23% in the past three months and is inclined towards its 52-weeks high price of $95.5. On the technical analysis front, the stock has a support level of ~$85.5 and resistance of ~$95.77. We have valued the stock using the Price to Book Value multiple based illustrative relative valuation method and have arrived at a target price with a correction of low single-digit (in % terms). For the purpose, we have taken peers like Monolithic Power Systems Inc (NASDAQ: MPWR), Xilinx Inc (NASDAQ: XLNX), Inphi Corp (NASDAQ: IPHI), etc. Considering the steep increase in the stock price over the last three months, current trading levels, and valuation, we give an “Expensive” rating for the stock at the closing price of $92.48, up by 3.53%, as on 30 December 2020.

AMBA Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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