It Was a GoPro (GPRO) Christmas - Pacific Crest (AMBA)

GoPro, Inc. (NASDAQ: GPRO) and supplier Ambarella (NASDAQ: AMBA) are indicated to open higher Tuesday following positive comments from Pacific Crest analyst Brad Erickson.

In a note to clients, Erickson said checks confirmed it was a 'GoPro Christmas.' However, despite very strong holiday demand, valuation is keeping him on the sidelines with GoPro. Meanwhile, the analyst is still bullish on Ambarella and reiterated an Outperform rating and $70 price target.

The firm's checks showed holiday sell-through accelerated meaningfully leading up to Christmas. In addition, they found meaningfully lower inventory levels on both an absolute basis and a days-of-inventory basis for Hero 4 products. Additionally, the analyst said the fact that Best Buy had not had consistent stock of Hero 3 White and Hero 3+ Silver since the beginning of December was encouraging.

"We believe there is a high probability that the company sold its over-allotment of mid-tier cameras, and due to these outages, we heard that customers were purchasing Hero 4 products as gifts due to lack of Hero 3 and 3+ inventory, which surprised us," Erikson said.

Given the stronger mix assumptions and slightly higher unit assumptions the firm is raising estimates on GoPro slightly. However, they maintained a Sector Perform rating on the stock. The analyst said they need to see growth rates inflect meaningfully higher before being able to justify a stock price beyond the mid $70s.

Meanwhile, on Ambarella they remain buyers on the GoPro numbers and ahead of what is likely to be a very eventful CES for Ambarella. "... we believe interest and optimism around emerging HD video applications is likely to build in the coming weeks and months," the analyst said.

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 $54.04 yesterday.

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