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Canaccord Lifts Ambarella Price Target From $65 To $85, Expects GoPro Sales Recovery

Although the much publicized recent struggle that Ambarella Inc AMBA has been part of with its key customer, GoPro Inc GPRO, are likely to impact the July quarter results, Canaccord Genuity’s Matthew D. Ramsay believes that “strength in drones, home security and other markets should drive results above the guidance midpoint.”

Ramsay reiterated a Buy rating on Ambarella, while raising the price target from $65 to $85.

What Will Drive Performance?

“Further, we anticipate broadening strength in camera demand and a recovery of sales into GoPro to support the HERO5 launch will drive 2H/F'17 results solidly above consensus, though anticipated quarterly seasonality remains unclear given the image sensor supply disruption at Sony due to the earthquake earlier this year,” the analyst mentioned.

Canaccord’s research indicates there is likely to be ample supply of sensors to support the holiday volumes from large customers like GoPro.

However, some smaller vendors are likely to see volumes pushed into Ambarella’s January quarter, marginally impacting the October quarter guidance upside and the historical January quarter downward seasonality.

Guidance Revised

“Overall, we anticipate a strong 2H/F'17 for Ambarella and believe full year results will achieve updated revenue guidance for flat to down 5 percent, implying strong mid-teens topline growth during the 2H,” Ramsay stated.

Although this is lower than the initial growth target of 15-20 percent that the company had guided to at the start of the year, the analyst believes that the revised guidance reflects the strength of the diversifying business, against a backdrop of meaningful impacts from GoPro and Sony Corp (ADR) SNE.

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