Pacific Crest: Qualcomm Buying Ambarella Is 'Plausible'

In a report published Tuesday, Pacific Crest Securities analyst Brad Erickson reiterated an Overweight rating on shares of

with a price target raised to $96 from a previous $78 given a growth and margin expansion trajectory through 2018. Erickson noted that part of the strength seen in Ambarella's stock could be attributed to

's recent capital raise that is intended for capital returns and acquisitions. Qualcomm

$10 billion through a debt offering with only half of that amount allocated towards an accelerate share buyback plan. Shares of Ambarella were trading with a $2.73 billion market cap on Wednesday morning, leading the analyst to state that "there is still plausible room" for an "Ambarella-sized deal." "While we hadn't expected such substantive acquisition speculation this soon since going public, we believe such a deal could make both technology and financial sense in line with our views on the stock," Erickson wrote. "Ambarella has commented historically that if one of the big chip companies were to inquire around licensing, the company would listen." Erickson continued that Qualcomm could "certainly" integrate Ambarella's technology. Specifically, Ambarella's "prowess" around video processing with leading power management, could result in Qualcomm gaining access to new end markets.

Ambarella holds close ties with

as it is a key component supplier to the company. Canaccord Genuity analyst Matt Ramsay