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Cramer Says Watch Drones, Not GoPro Inc (NASDAQ:GPRO)

GoPro Drones and Jim Cramer

Jim Cramer thinks that there’s a huge commercial opportunity in drones, and he thinks that the market is taking it for granted. Speaking about Ambarella Inc (NASDAQ:AMBA) earnings, Mr. Cramer said that traders were spending way too much time thinking about the firm’s connection to GoPro Inc (NASDAQ:GPRO) and not enough time on the drone market.

Jim-Cramer GoPro inc.

Cramer made reference to the Ambarella Inc conference call during his Stop Trading segment on CNBC on Monday. The investor said that “Ambarella is THE drone play, and that’s why the stock is going up.” Shares in the firm are up by more than 4% on a poor day for stocks on Monday. Shares in the firm have jumped by close to 50% in the last month.

Cramer buys into drones

Ambarella Inc may be THE drone play according to Mr. Cramer, but in the minds of most traders it’s the firm that sells chips to GoPro. The action camera maker has become one of Ambarella’s largest sources of revenue in recent years, but there’s a lot more to the firm as Mr. Cramer points out.

“It’s not just a one-trick pony for GoPro” according to Cramer. He says that though GoPro has a great ecosystem, Ambarella is the “star of the Anmbarella show.”

GoPro has been doing it’s best to try and separate itself from its own cameras in 2015. The firm is trying to show Wall Street that it can do more than just sell cameras, and that there is a bigger market that it can make use of.

Ambarella is, however, the company to watch in the Drone market. GoPro may have more effect selling the things to consumers, and it may still be one to watch in the unmanned aerial drone world.

GoPro goes wild

Cleveland Research’s Benjamin J. Bollin says GoPro stock could hit highs of $70 as the firm’s new ideas take root. Google is partnering with the firm on a new VR array for Project Jump, and GoPro itself has a simpler version of that planned to let people record their own VR videos.

Bollin said “We see improving execution from the business with greater geographic diversification and product diversification.” He sees the firm “one of the largest players in the [drone] category within several years.”

Bollin says that his clients should Buy shares in GoPro. He reckons that the firm will make an extra $0.10 per share for every 100,000 drones shipped going forward. Cramer may not be as sure about playing GoPro for the drone market, and Wall Street seems to agree.

Shares in the firm are still strong, and they’ve gained more than 18% in the last month and the major focus on drones and VR began, but since the start of 2015 shares are down by close to 6%.

Ambarella may, as Cramer says, still be the big pick in the drone market. With a PE of 69, it’s trading at a slightly lower value than GoPro, though it’s forward margin may not be quite as high.

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