Canaccord: Ambarella Drone Revenue To Grow 10x In 3 Years

Matthew Ramsay at Canaccord Genuity upped the firm's price target for Ambarella Inc (NASDAQ: AMBA) by 4.3 percent on expectations that the firm's revenue from drones will grow from $6 million in FY2015 to $50 million in FY2017.

That corresponds to a doubling of the drone market in each of the next couple years, from 1.5 million in 2014 to 10 million in 2017. Further, Ramsay said that the opportunity is also high-margin, improving Ambarella's bottom-line even further.

Ramsay was bullish on Ambarella's recent VisLab acquisition, arguing that the current "investments in video analytics … will prove undervalued long term." Further, the investments will "drive significant value and differentiation" and "will eventually prove [to be Ambarella's] most valuable." Over the long term, Cannacord said that home video and security, video capture applications, wearable cameras and automotive cameras will drive Ambarella's upside opportunities.

Canaccord's new $120 target is based on shares trading at 30x the FY2017 expected non-GAAP EPS of $4. Ramsay also said that the firm's "conviction" that the price target would be reached increased as a result of the latest analysis.

Ambarella was up 4 percent to $103.25 on the day. Since the middle of last month, shares came off sharply, falling 15.5 percent. Year-to-date, prices have still climbed nearly 100 percent.