Christmas Came Early For GoPro

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  • Ambarella Inc AMBA shares have been on a downtrend this year, after peaking at $129.19 on June 17.
  • Pacific Crest’s Brad Erickson maintained an Overweight rating for the company, with a price target of $123.
  • A GoPro high-end refresh in 1H16 should benefit Ambarella with GoPro drone offering further upside.

Analyst Brad Erickson mentioned that Ambarella’s October quarter guidance demonstrated the strong channel fill strategy of GoPro Inc GPRO ahead of the Christmas holiday.

“Timing and product mix affected AMBA's guidance, but we believe it remains sole-sourced at GoPro while the rest of the business is growing over 60% y/y,” Erickson added.

The firm's GoPro October quarter forecast is around flat, since higher units are more than offset by a sizable mix shift. Erickson noted further that the difference “between Session and Hero 4 pricing appears to be as much as 40%-50% y/y.”

Talks with management have revealed that there has been no socket loss at GoPro, thus limiting the risk of further multiple compression, the Pacific Crest report stated.

Although the company is having some GoPro-related growing pains, its diversified growth story remains intact, Erickson said, while adding that recent competitive concerns appear overdone and that a meaningful upside potential remains.

“China IP security paused in the quarter due to macro concerns and the company still beat revenue estimates, which highlights how diversified the business has become,” the report said. Erickson expects Ambarella to generate 44.5 percent two-year CAGR for earnings growth this year and the next.

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Posted In: Analyst ColorReiterationAnalyst RatingsTechBrad EricksonPacific Crest
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