Canaccord analysts weigh in on wireless chip maker Broadcom Ltd (NASDAQ:AVGO) and video chip-maker Ambarella Inc (NASDAQ:AMBA), as the companies reported their quarterly earnings yesterday evening. Let’s take a closer look.
In a research report released this morning, Canaccord analyst Michael Walkley reiterated a Buy rating on shares of Broadcom with a price target of $215, after the company reported fiscal third-quarter results, which were consistent with Walkley’s estimates and issued revenue guidance above his expectations.
Walkley commented, “Management continues to execute on synergy targets, with the next incremental step in cost savings driven by consolidating ERP systems between Avago and Broadcom and eliminating duplicate infrastructure and personnel costs. This should result in a quarterly operating expense run-rate of roughly $780M/ q in 1H/F17. We believe management will continue to execute and achieve synergy targets given management’s strong track record of integrating acquisitions.”
“Also, the debt was restructured, lowering the effective interest rate from 3.5% to 2.9%. We believe Broadcom is a leading global diversified semiconductor company with a broad portfolio of category-leading products and a leading customer base addressing the wireless and wired infrastructure, enterprise & data center networking and storage, IP traffic routing, and Industrial verticals. Strong Q4/F16 guidance was above our expectations and supports our thesis the company is positioned for solid long-term sales and earnings growth with industry-leading margins,” the analyst added.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Walkley has a yearly average return of 14.4% and a 59% success rate. Walkley has a 52.4% average return when recommending AVGO, and is ranked #30 out of 4132 analysts.
Out of the 31 analysts polled by TipRanks, 30 rate Broadcom stock a Buy, while 1 rates the stock a Hold. With a return potential of 9%, the stock’s consensus target price stands at $192.50.
Ambarella shares are down nearly 4% in pre-market Friday, after the company released its fiscal second quarter results, with profit falling to $8.6 million from $23.1 million, a year earlier. In addition, sales fell nearly 23% to $65.1 million.
However, Canaccord’s Matt Ramsay remains quite positive on the earnings report and sees upside potential for the stock. The analyst reiterated a Buy rating on AMBA, while slightly raising the price target to $86 (from $85), which implies an upside of 20% from current levels.
Ramsay commented, “Ambarella reported solid July quarter (Q2/F’17) results — against well-known GoPro and Sony image sensor supply headwinds — above our and consensus estimates on revenue, gross margin, and non-GAAP EPS. The beat was driven by a robust quarter from key drone customer DJI, a rich product mix with larger high-tier customers receiving more Sony sensor supply, design win momentum across all markets, and an added 150-basis-point tailwind to gross margin from sale of previously writtendown chip inventory.”
“Despite the nearterm 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,” the analyst continued.
According to TipRanks.com, analyst Matt Ramsay has a yearly average return of 10.5% and a 61% success rate. Ramsay has a 0.3% average return when recommending AMBA, and is ranked #180 out of 4132 analysts.
Out of the 7 analysts polled by TipRanks ׁ(in the past 3 months), 5 rate Ambarella stock a Buy, while 2 rate the stock a Hold. With nearly one percent upside, the stock’s consensus target price stands at $72.33.