Needham Turns Bullish On Ambarella, Says It's Undergone 6-Year Transformation

Despite the pandemic, computer vision design activity continues to be robust, and Ambarella Inc’s AMBA three rounds of design wins suggest a strong ramp in revenue in 2022, according to Needham.

The Ambarella Analyst: Quinn Bolton upgraded Ambarella from Underperform to Buy and set a $55 price target. 

The Ambarella Thesis: Ambarella has executed a transformation over more than six years and seems to be reaching an inflection point in ramping its CV processors, Bolton said in the Tuesday upgrade note. (See his track record here.)

The company has had three waves of design wins, the analyst said. 

• First Wave: Ambarella initially manufactured CV processors for the security camera and automotive markets and has secured 15 CV design wins in the professional security camera market, he said.
• With shipments commencing last year, these wins are expected to drive CV revenue to around 10% of total by the end of 2020, Bolton said. 
• Second Wave: Ambarella expects CV adoption to be driven in the near-term by the consumer security camera segment, having already bagged the first design win, the analyst said. 
• Third Wave: CV adoption is expected to be driven by automotive applications in 2022 and beyond, he said. 

CV design wins in the professional and consumer security cameras markets will likely drive revenue growth in 2021, followed by the initial ramp of automotive CV design wins in 2022, Bolton said.

He expects CV processors to generate 46% of Ambarella’s revenue in 2022.

AMBA Price Action: Shares of Ambarella were up 3.44% at $48.40 at the time of publication Tuesday.

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