Four Analysts Weigh In On Ambarella's Results

on Tuesday reported a better than expected

By Wednesday morning, four of Wall Street's top analysts released unique commentary on the print and the company's outlook.

Matthew Ramsay of Canaccord Genuity commented in a note that Ambarella proved yet again in its quarterly results that its portfolio of differentiated application-specific video encode, compression, and analytics processors positions the company for strong sales and earnings growth. Ramsay also noted that Ambarella's investments in video analytics will also provide a sustained long-term differentiation and pricing stability. In addition, expectations for the drone market is large with current expectations for the segment to contribute 10 percent of overall revenue this year with a longer term objective of emerging with a total addressable market similar in size to the actions sports camera market. As such, Ramsay stated that upside to current expectations remains likely. Shares remain Buy rating with a price target raised to $115 from a previous $86.

Joseph Moore of Morgan Stanley commented in a note that Ambarella continues to execute well and demonstrate growth from new categories such as drones. In addition, the analyst noted that a "richer" mix of high end products across markets is translating to an improved gross margin. However, Moore cautioned that the "substantial" run up in the stock results in a "fairly balanced" risk to reward profile as the company's growth hinges on "highly volatile" categories with limited visibility. In addition, the "dramatic" expansion in multiple product categories will likely bring more competition to the space over time. Shares remain Equal-weight rated with a price target raised to $100 from a previous $65.

Ross Seymore of Deutsche Bank commented in a note that Ambarella's momentum continued with another "strong" beat-and-raise quarter. The company continues to "impressively" execute well in its core Sports/Wearables category while expanding its exposure to other areas such as drones and home security at a pace that is faster than expected. Seymore admitted that he previously recommended waiting for a better entry point and by doing so he missed out the run-up in shares. However, "at the risk of sounding redundant" the analyst is still urging investors to wait for a better entry point. Shares remain Hold rated with a price target raised to $100 from a previous $80.

N. Quinn Bolton of Stifel upgraded shares of Ambarella to Hold from Underperform with no assigned price target (but a valuation range of $88 to $105) following the company's second consecutive "significantly" better than expected results. According to Bolton, Ambarella's business continues to exceed growth expectations while offering "meaningful" new revenue opportunities in new segments. As such, the analyst admitted that his concerns about slowing growth and multiple contraction were both wrong and ill-timed. Finally, Bolton noted that shares may not necessarily be inexpensive, a 25-30x P/E multiple is justified by the "much stronger" than expected growth and "mild" competitive environment.