Wall Street Reacts To Nvidia's Quarter

NVIDIA Corporation NVDA reported another record quarter on Thursday, but the market wasn’t particularly impressed. Nvidia stock traded down more than 2 percent on Friday. Here’s what Wall Street analysts had to say about Nvidia following the report.

Low-Quality Beat

Deutsche Bank analyst Ross Seymore said Nvidia’s 10 percent revenue beat relative to its guidance was in-line with its recent average, but the quality of the beat was a bit disappointing.

“While growth remains strong across virtually every segment, the quality of the beat was somewhat lower as GPU channel fill and Crypto delivered the majority of the upside, while Datacenter was slightly below out estimate,” Seymore wrote in note.

Stifel analyst Kevin Cassidy said Nvidia delivered a solid quarter, despite revenue strength coming in large part from cryptocurrency demand.

“Due to investors' concerns around the volatility of the cryptocurrency market, the company may not get full credit for the beat to estimates,” Cassidy wrote.

Outlook Unclear

Morgan Stanley analyst Joseph Moore said cryptocurrency and the timing of Nvidia’s new gaming product cycle make second quarter numbers difficult to predict.

“This year is going to be tricky to calibrate, as the channel was starved of product 3 months ago, is still on the lean side (but we still have tough sequential comparisons because inventory built in April),and if it does launch this quarter, it will just be a partial quarter,” Moore wrote.

Bernstein analyst Stacy Rasgon said the biggest question for Nvidia in the near-term is gaming revenue and the impact it might have on Datacenter growth in the second quarter.

“We believe guidance implicitly suggests another quarter of solid datacenter growth to come,” Rasgon wrote.

BMO Capital Markets analyst Ambrish Srivastava said investors can continue to expect Nvidia stock to trade at a premium to its peers due to its leadership position in the AI market.

“We believe the company expects sequential growth in each of the growth platform segments, albeit Gaming is going to be well below seasonal in F2Q vs. the much greater than seasonal results in F1Q (which were really driven in large part by channel fill, per our view),” Srivastava wrote.

What’s Already Priced In?

With Nvidia stock already up more than 1,000 percent in the past three years, analysts disagree about how much higher the stock can go.

KeyBanc analyst Michael McConnell said a lot of growth is already priced into Nvidia stock.

“We estimate the premium valuation of the shares already reflects future data center segment growth as well as reaccelerating gaming revenue growth in the second half of fiscal 2019,” McConnell wrote.

B. Riley FBR analyst Craig Ellis said Nvidia still has plenty of bullish catalysts ahead.

“Any Friday pullback will present an attractive entry opportunity, with numerous catalysts coming in CY18 we believe can fuel a further rise in SS estimates,” Ellis wrote.

GBH Insights analyst Daniel Ives said Nvidia is firing on all cylinders after delivering yet another solid quarter.

“We see no speed bumps ahead as the Street is starting to fully realize the transformational growth story at Nvidia,” Ives wrote.

Ratings And Targets

• Deutsche Bank has a Hold rating and $260 target.
• Bernstein has an Outperform rating and $300 target.
• Morgan Stanley has an Overweight rating and $273 target.
• Stifel has a Hold rating and $243 target.
• KeyBanc has a Sector Weight rating and no target.
• BMO has a Market Perform rating and $225 target.
• B. Riley FBR has a Buy rating and $300 target.

Nvidia's stock traded around $256.38 at time of publication Friday afternoon.

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