Analysts: Nvidia Needs A Big Second Half Of 2019

NVIDIA Corporation NVDA stock jumped 9 percent after hours Thursday after the company reported earnings and revenue beats.

Nvidia reported fourth-quarter revenue of $2.21 billion, slightly above consensus estimates but down 24 percent from a year ago. Nvidia said it expects fiscal 2020 revenue to be “flat to down slightly,” better than consensus estimates for a 7 percent decline.

Management blamed a crash in cryptocurrency mining demand and deteriorating end-market conditions for the fourth-quarter slowdown.

Several analysts have weighed in on the mixed report. Here’s a sampling of what they had to say.

Tale Of Two Halves

Tigress Financial analyst Ivan Feinseth said gaming GPU demand should become a distant memory in the second half of 2019.

“I have been saying through the whole difficult period that Nvidia has been having that the weakness was a buying opportunity and we would see a turn sometime in the near future,” Feinseth wrote in his daily newsletter.

MKM Partners analyst Ruben Roy said investors should expect a slow start and a strong finish to fiscal 2020.

“While we continue to see NVDA executing well on technology roadmap as well as with customer engagements that will continue to drive numerous growth opportunities, for now, as we assess valuation against the backdrop of a challenging revenue year, we believe meaningful upside catalysts to shares will be limited,” Roy wrote in a note.

Aggressive Guidance

Bank of America analyst Vivek Arya said Nvidia’s fundamentals remain strong, and its guidance is aggressive but realistic.

“We believe NVDA remains one of the few companies in semis able to grow its topline at a 15-20% CAGR with leadership in multiple high-growth markets,” Arya wrote.

Gene Munster said traders should expect Nvidia’s stock to remain range-bound in the near-term.

“While we are believers in the Nvidia story and expect the company to be one of the more notable winners from the long-term growth trends of gaming, AI/datacenter, and autonomous vehicles, we believe that there remains risk to FY20 guidance,” Munster wrote.

Long-Term Thesis Intact

UBS analyst Timothy Arcuri said Nvidia investors can finally see a light at the end of the tunnel after a disappointing couple of quarters.

“Mgmt effectively addressed concerns around gaming channel, data center competition (or lack thereof), and fundamental sell-through on the gaming side,” Arcuri wrote.

BMO Capital Markets analyst Ambrish Srivastava said the issues in the gaming market should be relatively well understood at this point, and Nvidia stock is reasonably priced at current levels.

“We are raising our estimates, driven largely by higher revenues and lower share count, partially offset by a higher tax rate and lower GM,” Srivastava wrote.

RBC Capital Markets analyst Mitch Steves said nothing about the quarter changed his long-term bullish thesis.

“Going forward, we think mix will continue to move toward: 1) Data Center, which should grow at ~100% near-term and continue to grow high double digits long-term; 2) Gaming should grow mid-single digits long-term; and 3) Automotive should ramp in CY19/CY20,” Steves wrote.

Ratings And Price Targets

• Bank of America has a Buy rating and $193 target.
• UBS has a Buy rating and $180 target.
• BMO has a Market Perform rating and $140 target.
• MKM has a Neutral rating and $170 target.
• RBC has an Outperform rating and $180 target.

The stock traded at $159.12 per share Friday afternoon.

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