Stifel Hikes Ambarella To $115/Share On Potential For 'Analytics Features'

In a report published Thursday, Stifel analyst Kevin E. Cassidy maintained a Buy rating on Ambarella Inc AMBA, while raising the price target from $105 to $115, after meeting with the company's CFO, George Laplante. "Following the meetings we are more convinced that Ambarella is methodically expanding on its core competencies (video capture, compression and energy efficiency) which is increasing competitive barriers to entry," analyst Kevin Cassidy said. Management expects its next generation device to be available in 2016 with the addition of analytics, which promises to "increase the intelligence of a video camera." In the report Stifel noted, "Analytics is currently software that helps the camera make decisions (e.g. did a dog or a person walk into a room, or is the drone about to hit an obstacle). In the future, management expects to have analytics features in hardware. Once in hardware, decisions can be made much faster than in software. We see analytics as a critical barrier to entry for competitors and providing additional camera features." Ambarella has plans to invest around $10 million in developing its next gen video processors, which would be based on 14nm, the leading edge of semiconductor process technology. The prototype may be available in October, with full production expected a year later. The revenue and non-GAAP EPS estimates for FY17 have been raised from $384.0 million to $404.0 million and from $3.19 to $3.50, respectively, to reflect "a trend for broadband service providers offering home monitoring as part of their internet, broadcast TV and telephone bundle," Cassidy wrote.