Pacific Crest: Stick With Ambarella Despite GoPro Disappointment

Investors should stick with Ambarella Inc AMBA, despite GoPro Inc GPRO disappointment, due to its high exposure to secular growth and underappreciated longer-term earnings power, according to Brad Erickson of Pacific Crest. Shares of Santa Clara, California-based Ambarella , which makes HD video processing chips, have dropped 18 percent this year, mainly due to the weak pre-announcement from its key customer GoPro. Related Link: http://www.benzinga.com/analyst-ratings/analyst-color/16/02/6749882/deutsche-bank-cuts-ambarella-outlook-on-weak-gopro-envir#ixzz41gDdncV1 "Our latest GoPro channel checks indicate more reasonable days of inventory of 14 days versus the 27 we found in November, below both the historical average and same time a year ago, which were both roughly 16 days. We continue to see disappointing demand for Session," Erickson wrote in a note to clients. Meanwhile, the analyst believes recent drone demand has been relatively in line after finding drone demand slightly disappointing during the holiday. Erickson cut his Ambarella estimates to reflect GoPro's updated 2016 outlook. The analyst has cut his fourth-quarter EPS view by a penny to 48 cents and now sees revenue of $65.5 million, down from prior view of $66.2 million. The analyst also trimmed full year sales view to $313.9 million from $314.6 million. Analysts' consensus estimate calls for EPS of 48 cents a share on revenue of $65.90 million for the fourth quarter and $3.12 a share on revenue of $313.62 million for the full year. Erickson has an Overweight rating and $72 price target on AMBA stock, which was down 2 percent.