Analyzing Wolfspeed (NYSE:WOLF) and Ambarella (NASDAQ:AMBA)

Ambarella (NASDAQ:AMBA) and Wolfspeed (NYSE:WOLF) are both mid-cap computer and technology companies, but which is the better business? We will compare the two companies based on the strength of their dividends, analyst recommendations, profitability, earnings, risk, institutional ownership and valuation.

Profitability

This table compares Ambarella and Wolfspeed’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ambarella	-74.81%	-23.78%	-20.46%
Wolfspeed	-96.12%	-27.37%	-4.78%

Risk and Volatility

Ambarella has a beta of 1.65, suggesting that its stock price is 65% more volatile than the S&P 500. Comparatively, Wolfspeed has a beta of 1.64, suggesting that its stock price is 64% more volatile than the S&P 500.

Institutional and Insider Ownership

82.1% of Ambarella shares are held by institutional investors. 5.7% of Ambarella shares are held by company insiders. Comparatively, 0.6% of Wolfspeed shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and target prices for Ambarella and Wolfspeed, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ambarella	1	4	7	0	2.50
Wolfspeed	1	9	4	0	2.21

Ambarella currently has a consensus price target of $71.08, suggesting a potential upside of 41.83%. Wolfspeed has a consensus price target of $36.29, suggesting a potential upside of 38.13%. Given Ambarella’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Ambarella is more favorable than Wolfspeed.

Earnings and Valuation

This table compares Ambarella and Wolfspeed’s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ambarella	$226.47 million	9.07	-$169.42 million	($4.24)	-11.82
Wolfspeed	$921.90 million	3.59	-$329.90 million	($6.46)	-4.07

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

Summary

Ambarella beats Wolfspeed on 11 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 Wolfspeed

Wolfspeed, Inc. operates as a powerhouse semiconductor company focuses on silicon carbide and gallium nitride (GaN) technologies in Europe, Hong Kong, China, rest of Asia-Pacific, the United States, and internationally. It offers silicon carbide and GaN materials, including silicon carbide bare wafers, epitaxial wafers, and GaN epitaxial layers on silicon carbide wafers to manufacture products for RF, power, and other applications. The company also provides power devices, such as silicon carbide Schottky diodes, metal oxide semiconductor field effect transistors (MOSFETs), and power modules for customers and distributors to use in applications, including electric vehicles comprising charging infrastructure, server power supplies, solar inverters, uninterruptible power supplies, industrial power supplies, and other applications. In addition, it offers RF devices comprising GaN-based die, high-electron mobility transistors, monolithic microwave integrated circuits, and laterally diffused MOSFET power transistors for telecommunications infrastructure, military, and other commercial applications. The company was formerly known as Cree, Inc. and changed its name to Wolfspeed, Inc. in October 2021. Wolfspeed, Inc. was incorporated in 1987 and is headquartered in Durham, North Carolina.