Pacific Crest Says 'We Are Buyers' Of Ambarella Following Q1 Results

Ambarella Inc’s AMBA full-year guidance was “better than feared,” when the Sony Corp (ADR) SNE image sensor disruption is accounted for.

Brad Erickson of Pacific Crest maintained an Overweight rating on Ambarella, with a price target of $53.

“We are buyers and see upside to $53 on the company’s clear leading technology prowess, strong exposure to secular growth ex-GoPro Inc GPRO, confidence in a return growth in the second half and attractive valuation,” Erickson stated.

Better Than Feared Outlook

Ambarella mentioned that 40-45 percent of its revenue was exposed to Sony’s Kumimoto image sensor plant, which had shut down till May 21, following the April earthquake.

“We estimate that $10 million-$15 million of revenue may have been excluded from full-year guidance for flat to down 5 percent,” Erickson said.

The analyst expects implications that the company would return to growth in 2H16 would increase investor confidence in the strength of IP security, as well as GoPro’s new product ramp.

According to the Pacific Crest report, “Management called out share gains in IP security, a lack of pricing pressure in IP security, an expanding customer base in home monitoring, several new drone design wins and its first automotive OEM win for built-in video camera recorders.”

In addition, Erickson pointed out that gross margins continue to outperform, driven by the strength in drones.