Ambarella (NASDAQ: AMBA), a developer of high-definition video and image processors, is reaping the benefits of Chinese smartphone company Xiaomi’s new small hi-definition camera. Although the new camera will only be solid in China, analysts are bracing for its impact on GoPro (NASDAQ: GPRO) shares because Xiaomi’s camera is half the price and offers better quality than the GoPro. Ambarella outfits GoPro with its video-encoding chips and has confirmed that its chips will be used in Xiaomi’s new camera as well. In addition to this new venture, Ambarella released an impressive fourth quarter report for fiscal year 2015 on March 3rd.
Revenue for the fourth quarter was $64.7 million, up 62% year-over-year, and beating Wall Street’s estimate which ranged from $57 million to $60 million. Ambarella posted a GAAP net income per share of $0.53 on a diluted basis, beating the analyst estimate of $0.49 and nearly doubling the figure from $0.18 in the same quarter of last year.
Ambarella CEO Fermi Wang commented, “Our strong fourth quarter and fiscal year results reflect the steady expansion of our product offerings and customer growth across our core markets, as well as early growth in new markets… We look forward to driving continued innovation in the year ahead.”
On a conference call, CFO George Laplante stated that Ambarella expects revenues between $64 million and $68 million for the first quarter of fiscal year 2016, representing a 56% to 66% year-over-year increase. Laplante expects first quarter revenue to be “positively impacted by the launch of new products from existing customers… as well as introductory products from new customers [such as] the new sports camera from Xiaomi.”
In addition, Ambarella enthusiasts are looking forward to new market opportunities for the chip, such as drones, body cameras for police officers, and crash cameras in cars.
According to SmarterAnalyst, Matt Ramsay of Canaccord Genuity reiterated a Buy rating on AMBA and raised his price target from $66 to $74 on March 4th. Ramsay noted that the strong quarterly report beat his expectations and that “April quarter guidance was also materially higher than expected,” thanks to Xiaomi’s new action camera. Ramsay continued, “We continue to believe Ambarella’s portfolio of highly differentiated application-specific video encoding microprocessors positions the company for strong sales and earnings growth as HD and UltraHD video capture and compression become increasingly important across several growing consumer and enterprise markets. Further, we believe Ambarella’s investments in video analytics will prove significantly undervalued and provide sustained long-term differentiation and pricing stability.”
Overall, Matt Ramsay has an 82% success rate recommending stocks with a +10.7% average return per recommendation.
Separately on March 4th, analyst Shebly Seyrafi of FBN Securities maintained an Outperform rating on AMBA and raised his price target from $70 to $80, after the company’s “blowout quarter.” Contrary to many analysts, Seyrafi does not think that Xiaomi’s new camera will have a significant impact on GoPro sales though he does note that sales “will incrementally benefit from the new win with Xiaomi.” He explains, “We disagree with the bears on GPRO that Xiaomi is going to significantly hurt GPRO as GPRO derives only 10% of revenue from Asia, and we see Xiaomi as being primarily focused on China and Southeast Asia.” He adds that Ambarella will continue to benefit from strong GoPro sales.
Overall, Shebly Seyrafi has a 58% success rate recommending stocks with a +4% average return per recommendation.
On average, the top analyst consensus for Ambarella on TipRanks is Moderate Buy.
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