Morgan Stanley: Ambarella Is Now Worth $65 A Share

In a report published Wednesday, Morgan Stanley analyst Joseph Moore suggested commented on Ambarella Inc's (NASDAQ: AMBA) fourth quarter results.

Moore noted that the company reported a non-GAAP earnings per share of $0.68 on revenue of $64.7 million, topping his expectations of $0.48 per share and $58.5 million. The strong results were attributed to stronger fourth quarter GoPro camera sales and the sale of the A7 SoC to Xiaomi for its recently announced sports camera.

Moore added that wearables cameras continue to be the leading revenue generator due to higher average selling prices while IP security cameras posted "solid" results in a seasonally slow quarter.

However, the analyst argued that while company fundamentals are strong and driven by high GoPro units and a recovery in automotive, after recent multiple expansions, shares have "limited upside."

"The company calls for long term growth to go from 20-25 percent% to 27- 30 percent with operating margins in the high-20 percent," Moore wrote. "We like the company's long term growth prospect, but think it takes a breather for earnings to catch up as it already trades at a multiple on the high end of its small cap semiconductor peer group."

Shares remain Equal-weight rated with a price target raised to $65 from a previous $59.