Canaccord Talks Ambarella's Strong Results, Conservative Guidance And GoPro Headwinds

Ambarella Inc AMBA delivered some impressive Q2 numbers on Thursday. Despite the market’s negative reaction, Canaccord analyst Matthew Ramsay remains bullish on the stock.

Ambarella delivered non-GAAP EPS of $0.54 on revenue of $65.1 million in Q2. Both numbers beat consensus analyst expectations of $0.38 and $64.3 million, respectively.

Ambarella shares are down 6.3 percent in Fridays session, and the company’s guidance may be to blame. However, Ramsay appreciates the company’s conservative approach to setting market expectations.

“Despite the near-term hurdles, our long-term conviction regarding Ambarella’s leading technology position in several growing end markets including wearable, security, automotive, and drone cameras remains intact, and we believe long-term investors will be rewarded as new design wins ramp and the launch of new 14nm chipsets next year return the company to solid Y/Y sales/earnings growth,” he explained.

Related Link: GoPros And Drones Bullish For Ambarella, KeyBanc Says

Ramsay was particularly impressed with Ambarella’s Q2 strength given the well-known headwinds from GoPro Inc GPRO's slumping sales and Sony Corp (ADR) SNE’s image sensor supply.

Canaccord predicts strong home security and drone camera growth ahead for Ambarella, and Ramsay noted that OEM camera sales could end up as Ambarella’s largest long-term market opportunity.

Canaccord reiterated its Buy rating on Ambarella and upped its price target from $85 to $86.

At time of publication, Ambarella shares were down 6.76 percent on the day, trading at $66.93.

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