Over the last few trading sessions we have seen the power of the Nvidia (NVDA) halo.  The halo is the coming to us in the form of investments NVDA has made in some smaller companies that are partners and or customers. 

Cerence (CRNC) was announced as a partner for large language modeling and as a result the stock jumped from $8 before the announcement to a high of $27.50 yesterday morning.

NanoX Imaging (NNOX) and SoundHound AI (SOUN) are among the companies that NVDA holds stock in.   They both saw positive stock moves following the announcements about the investment.

Yesterday, a new partnership was announced just prior to the Consumer Electronics Show which is better known as “CES” which starts today in Las Vegas.  The CEO of Nvidia is slated to make the keynote address to kick things off (this article was written before the speech).

The New Partner

Arbe Robotics Ltd (ARBE) is a Zacks Rank #2 (Buy) that has an F for Value and a D for Growth.  Yesterday the company announced that it is collaborating with Nvidia to enhance radar-based free space mapping and AI-Driven capabilities.  The stock vaulted $1.37 to close at $4.00 which was good for a 52% gain yesterday.

Other companies that have partnered with Nvidia has seen their share price move dramatically higher following news like this.  ARBE could be the next big mover thanks to the Nvidia Halo.

Description

Arbe Robotics Ltd. provides D Imaging Radar Chipset Solutions. The company is empowering automakers, tier-1 suppliers, autonomous ground vehicles, commercial and industrial vehicles and a wide array of safety applications with advanced sensing and paradigm-changing perception. Arbe Robotics Ltd., formerly known as Industrial Tech Acquisitions Inc., is based in Tel Aviv, Israel.

Earnings History

When I look at a stock, the first thing I do is look to see if the company is beating the number.  This tells me right away where the market’s expectations have been for the company and how management has communicated to the market.  A stock that consistently beats has management communicating expectations to Wall Street that can be achieved.  That is what you want to see.

Arbe Robotics Ltd (ARBE) has an OK earnings history with the company topping the Zacks Consensus Estimate in 2 of the last 4 quarters. 

The most recent earnings print saw the company post a loss of 13 cents when a loss of 11 cents was expected.

Over the last four quarters the average earnings surprise works out to be -22.7%.

Earnings Estimates Revisions

Earnings estimate revisions is what the Zacks Rank is all about. 

Estimates are moving higher for ARBE.

Following the recent miss, the estimates for this quarter have increased.

The consensus has moved from a loss of $0.11 to a loss of $0.10 over the last 60 days.

Next quarter has held still at a loss of $0.10.

The full year 2024 estimate is up from a loss of $0.42 to a loss of  $0.40.

Next year increased from a loss of $0.42 to a loss of  $0.39.

All of the estimate moves have come in the last 60 days.

Growth

For the calendar year 2024, the company is expected to post revenue of $1M.  As of yesterday, analysts were calling for topline growth of 600% to $7M.

Granted this is a very small revenue estimate, but the partnership with NVDA could mean hundreds of millions of dollars in future revenues.  That sort of potential was not lost on investors yesterday and there is a very good chance this stock continues to move higher.

Valuation

This is where the rubber meets the road.  The valuation is skewed wildly to the upside right now as the company is basically just getting started.  There is no PE as the company is losing money and the price to sales is astronomically high due to low sales and a big move in the stock price.  Price to book stood at 12x before the big move in the stock and could easily continue to run higher.

With a lack of valuation metrics, this stock leans heavily on the speculative side of things.  Investors would probably be better off watching tape on this one and comparing it to other recent NVDA partners moves than looking at things like its current ratio or return on assets. 

Looking at the daily trading chart we can see that there were 3 major drawdowns in the session.  The first send the stock from the $3.85 range to the lows of the day at $3.50 around 11:30 AM EST.  Just after 1:00 PM EST a draw down from the $4.40 range took the stock down to $4.00.  Finally just before the 3:00 PM hour we saw a repeat as the stock dropped from $4.50 to $4.00.   The takeaway from this is that the selling can be very violent for a short period of time so drawn downs of 10%  found support and that could be prevalent again today as well.

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Arbe Robotics Ltd. (ARBE) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Cerence Inc. (CRNC) : Free Stock Analysis Report

SoundHound AI, Inc. (SOUN) : Free Stock Analysis Report

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