Analysts are more bullish on Nvidia stock despite investor disappointment
Nvidia Corp.’s fiscal second-quarter results and outlook disappointed investors, but it made Wall Street analysts even more bullish, as they brushed aside the surprise drop in cryptocurrency-mining sales and the softer outlook.
Some analysts even welcomed the reduced crypto-related focus, as it allowed them to zero in on the graphics-chip maker’s earnings and revenue beats, and upbeat outlooks on gaming, datacenter artificial intelligence and autonomous driving businesses.
One analyst upgraded the stock to the equivalent of a buy rating—another did so before results were reported–and five increased their price targets, according to FactSet. That brought the number of bullish analysts surveyed by FactSet up to 21, and the number with the equivalent of hold ratings down to 12. The average target increased to $281.53 from $275.80 at the end of July, according to FactSet.
Meanwhile, the stock NVDA, -3.91%dropped 4.1% in morning trade, after results were released late Thursday, and was trading 7.5% below its June 14 record close of $266.91. The company said crypto-specific revenue was $18 million, below expectations of about $100 million, and is now projecting zero crypto-related contributions in its outlook.
Revenue for the latest quarter rose 40% to $3.12 billion, above the FactSet consensus of $3.10 billion, as gaming, datacenter, visualization and auto-related revenue all rose above expectations.
Don’t miss: Opinion: Nvidia says crypto-mining boom is over for now.
Analyst Rick Shafer at Oppenheimer raised his rating to outperform from perform. He said that while the stock could see some near-term pressure, as the downbeat outlook comes after such a strong performance in the stock, he sees “significant pent up demand” for Nvidia’s Turing gaming graphics processing units and believes estimates have been reset for upside. Read more about Turing graphics technology.
“With three solid, structural growth drivers in [datacenter] AI, gaming and autonomous, we see continued outsized growth,” Shafer wrote in a note to clients.
The stock has run up 28% year to date, after soaring 81% in 2017. In comparison, the PHLX Semiconductor Index SOX, -1.71%has gained 5.0% this year after rising 38% last year, and the S&P 500 index SPX, -0.14%has advanced 6.2% so far in 2018 after climbing 19% in 2017.
Raymond James analyst Chris Caso reiterated the outperform rating he’s had on the stock for the past 14 months, and his price target of $300, which is 17% above Thursday’s closing price of $257.44. In effect, he said good riddance to the company’s expectations for any crypto-related contributions.
“[W]ith the crypto risk now out of the way, we see the potential for future beats driven by the new gaming cycle,” Caso wrote. “Additionally, we continue to believe [Nvidia’s] valuation is not being driven by near-term numbers, but rather on the long-term potential for datacenter and auto.”
SunTrust Robinson Humphrey’s William Stein had a similar view on Nvidia’s crypto business, which he said he “disliked” for its volatility. Since the “stutter-step” in the downbeat outlook is mostly isolated to crypto, Stein said taking the outlook to zero “meaningfully de-risks the model.”
He reiterated his buy rating and $316 stock price target.
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