Why Rosenblatt Securities Is Bullish On Ambarella: Computer Vision, 'Sticky' Consumers, Revenue Growth

Ambarella Inc AMBA has solidified its status as the leader in video capture, compression and transmission processors and should now be considered a leader in computer vision, according to Rosenblatt Securities.

The Ambarella Analyst: Kevin Cassidy initiated coverage of Ambarella with a Buy rating and $60 price target.

The Ambarella Thesis: The bullish case for Ambarella's stock is based on the thesis that the need to store and analyze data is growing exponentially and much of that data comes from video, Cassidy said in a Monday initiation note. (See his track record here.)

Ambarella has been considered the leader in video capture, compression and transmission over the last 15 years and is now a leader in converting captured video into useful information, the analyst said. 

The company's end market consists of roughly 60% surveillance, 20% automotive and 20% consumer, he said.

Among its clients, around 80% represent "sticky" consumers, highlighted by a market with high competitive barriers, Cassidy said, adding that this should translate to consistent and long-term growth.

Ambarella deserves credit for presenting investors with new design win details each quarter for the last year, the analyst said.

This is part of a long-term strategy of pushing video technology into markets where technical expertise is required, he said. 

The stock's valuation would warrant an expansion, as new products translate to "fresh and sustained" revenue growth, Cassidy said. 

"We recommend investors own AMBA before this revenue growth becomes obvious."

Rosenblatt's $60 price target is based on eight times NTM revenue estimates.

AMBA Price Action: Shares of Ambarella were trading 1.68% higher at $49.65 at the time of publication Tuesday.

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