Needham Upgrades Ambarella On Core Market Strength, Flying Camera Ramp

In a report published Wednesday, Needham analyst N. Quinn Bolton upgraded the rating on

from Underperform to Hold, based on the strength in the company's core market, as well as ramp of flying cameras. The company reported stronger than expected results for F1Q16, while guiding to F2Q16 ahead of the consensus expectations. The analyst believes that the stronger than anticipated guidance was driven by the release of several new products across multiple segments and customer groups. "Importantly, flying cameras/drones are expected to take a step function higher in F2Q16 and represent more than 10 percent of sales for the first time," Bolton said, while adding that Ambarella's core business has proven to be "stronger than expected" and new drone and consumer IP security camera applications represent "meaningful new revenue streams for the company." The market leader in the flying camera segment, DJI, recently launched two new Phantom 3 models. Both models feature Ambarella's A9 camera SoC. The company therefore expects an increase in revenues from flying cameras in F216. According to the Needham report, "Based on AMBA's strong position at DJI and continued design win momentum with other manufacturers, management believes flying cameras will remain at 10 percent or more of sales going forward."