UPDATE: Morgan Stanley Initiates Ambarella at Overweight; Video Processing Pure Play

Morgan Stanley initiated coverage on Ambarella

with an Overweigh rating and a $12 price target. Morgan Stanley noted, "AMBA is a semiconductor play on increasing video content generation from portable devices. AMBA's superior technology should allow it to sustain 20% rev CAGR and 25% EPS CAGR over next 3-5 years. At 10x C2013e EPS, or less than 5x ex cash, we see >50% upside in 12 months. … Growth is driven by a range of end markets – Sports cameras, 31% of revenues growing an estimated 35% in C2013 (the most controversial point with investors); security cameras, 13% of revenues growing an estimated 50% in C2013; and automotive cameras, 19% of revenues growing an estimated 25% in C2013." Ambarella closed at $7.70 on Friday.