'The other shoe has dropped': Here's what Wall Street is saying about Nvidia's warning (NVDA)

NVIDIA CEO Jensen Huang


Nvidia lowered its guidance for fiscal fourth-quarter Monday, pinning disappointing sales of its gaming and datacenter platforms on weaker economic conditions, especially in China. The chipmaker said it sees revenue of $2.2 billion, plus or minus 2%. Previously, it expected revenue of $2.7 billion, plus or minus 2%. 

The annoucement sent shares down nearly 14%, close to its lowest levels of the year.

„Q4 was an extraordinary, unusually turbulent, and disappointing quarter,“ Nvidia founder and CEO Jensen Huang said in a filing with the Securities and Exchange Commission.

„As we worked through Q4, the global economy decelerated sharply, particularly in China, affecting consumer demand for NVIDIA gaming GPUs. Also, with initial shipments of new high-end RTX GPUs selling above MSRP, some customers may have delayed their purchase while waiting for lower price points and further demonstrations of RTX technology in actual games.“

The announcement caused most Wall Street analysts to lower their price targets for Nvidia, however they remained largely bullish. Following Monday’s announcement, 29 analysts had a „buy“ rating, 11 had a „hold,“ and just two had a „sell,“ according to Bloomberg data.

Here’s a roundup of what Wall Street analysts are saying about Nvidia’s warning: 

JPMorgan

Price Target: $200 (from $245)

Rating: Overweight

„From a stock perspective, as we have outlined in our recent earnings preview, we had expected this cycle to represent the 2nd round of estimate cuts for the broader coverage universe,“ JPMorgan’s Harlan Sur wrote.

„In addition, we believe stocks in general would likely start to discount improving fundamentals in 1H19 (after the first two rounds of number cuts and similar to prior down-cycles). We believe NVIDIA’s preannouncement represents a reset to sell-side and investor expectations with forward earnings not liking to move much lower after the company announces earnings in a few weeks (February 14th).“

Jefferies

Price Target: $185 (from $246)

Rating: Buy

„We forecast a modest 3% QQ revenue growth in the Apr-19Q, and that it takes 7 qtrs for NVDA to return to previous peak quarterly revenues,“ Jefferies analysts Mark Lipacis wrote. „The announcement was worse than we expected, but we continue to believe NVDA benefits from secular trends in parallel processing.“

He added: „We think one potential upside surprise could be an increase in the pace or level of share repurchases.“

FBN Securities

Price Target: $175 (from $210)

Rating: Outperform

„Note that in FQ3, China was 13% of revenue, while Taiwan was 29% of revenue,“ analyst Shebly Seyrafi wrote.

„However, this is based on where NVDA ships its product, which is often an intermediate product on its way to final sales to China (and other regions), so it does not exactly match China end-user demand.“

He added: „A key positive is that the company still expects that its excess channel inventory of Pascal midrange GPUs to be large depleted in the February to April time frame (so by the end of FQ1). We believe that this positions the company to return to strong gaming growth at the end of F2020.“

See the rest of the story at Business Insider
Source: Business insider

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