UPDATE: Ambarella (AMBA) Has Probably Bottomed, Says Dougherty; Shares Upgraded to Buy

(Updated - February 4, 2016 9:31 AM EST)

Dougherty & Co upgraded Ambarella (NASDAQ: AMBA) from Neutral to Buy with a price target of $43. Shares weakened after GoPro (NASDAQ: GPRO) reported soft results and guidance, but analyst Charles Anderson thinks shares have bottomed.

"GoPro's inventory correction has been known since Ambarella reported earnings in December, but the extent of the correction was jarring -- it's causing us to take GoPro out of estimates entirely for the April quarter and lower estimates overall. We're hopeful this is our last cut. If the stock opens at $36, it will be trading ~10x our new FY17 EPS of $2.55 plus the $10/sh in cash we expect to see within a few quarters. That feels like a bottom to us. Thus, we are upgrading Ambarella to a Buy and establishing a $43PT, based on 13x our FY17 EPS of $2.55 plus $10/share of cash," said Anderson.

"To be clear, this is fairly modest upside as there are still speed bumps ahead (the April quarter guide specifically; China security market weakness), but our sense is that Ambarella's product leadership is intact and there are multiple growth opportunities in front of it," added the analyst.

For an analyst ratings summary and ratings history on Ambarella click here. For more ratings news on Ambarella click here.

Shares of Ambarella closed at $37.43 yesterday.

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