Ambarella Could Win Off China, Latest Acquisition

• The share price of Ambarella, Inc. AMBA has increased a little over 30 percent, year to date.
• Stifel’s Kevin Cassidy has maintained a Buy rating and price target of $115 on Ambarella,
• Cassidy believes that the company’s market strategy and core video processing technology would continue to drive revenue growth significantly above the industry average.

“We believe the company has at least a one year lead over its competitors and we expect this lead to expand with the addition of computer vision to its processors,” Cassidy elaborated, while mentioning that the recent pullback in the stock offers an attractive entry point.

According to the Stifel report, “Ambarella's engineering team is converting newly acquired VisLab's computer vision algorithms to a new silicon architecture, which is likely to be a crucial step towards the company “adding intelligence to the video” that its processors capture, thereby expanding its edge over the competition.

The management has also highlighted that sports camera revenue is expected to decline sequentially and year on year, due to the launch of new models, although there is no change expected in the overall growth.

Revenue from China, on the other hand, are expected to grow quarter on quarter and year on year, with 40 percent year on year increase expected in the October quarter.

In addition, “Ambarella's world's first 14nm video processors expected to sample at the end of 2015,” the report added. There is no change to the guidance of long term annual revenue growth of 20-30 percent, with operating margin of 27-33 percent, which is the best in the semiconductor industry, according to Cassidy.