What 4 Nvidia Analysts Think About Its Q1 Print

NVIDIA Corporation NVDA reported late Wednesday forecast-beating first-quarter results and issued above-consensus revenue guidance for the second quarter.

The Nvidia Analysts: Reviewing the results, Rosenblatt Securities analyst Hans Mosesmann reiterated a Buy rating and $800 price target on Nvidia shares.

Needham analyst Denis Pyatchanin maintained a Buy rating and $800 price target.

KeyBanc Capital Markets analyst John Vinh maintained an Overweight rating and increased the price target from $700 to $775.

Raymond James analyst Chris Caso reiterated a Strong Buy rating and $750 price target.

The Nvidia Theses:

Rosenblatt Lauds Nvidia For an "Excellent Quarter:" Nvidia achieved record sales in its strategic market segments, with growth likely to continue through the fiscal year, Rosenblatt analyst Mosesmann said in a note. The company reported record revenues in gaming, data center, and professional visualization, he added.

The move toward crypto mining processors unusable for gaming and effective castration of the new RTX 30 series for Ethereum mining by cutting the hash rates by half, point to a much more benign Crypto cycle this time, the analyst said.

The analyst sees huge legs for the Mellanox/networking DPU, as CPU offloading becomes an architectural imperative in data centers.

The Street is underestimating Nvidia's increasing focus on software, virtualization and optimized frameworks, Mosesmann said. The ARM play will work, he added.

The company, the analyst noted, flagged supply constraints into the second half of the year.

"NVDA remains for us as the best must-own secular AI semiconductor/IP play," Rosenblatt said.

Needham Sees Continued Growth Despite Supply Constraints: Nvidia's sales growth, non-GAAP gross margins and non-GAAP EPS all exceeded expectations, and record desktop and laptop GPU sales drove a blowout quarter for the gaming segment, Needham analyst Pyatchanin said. Gaming demand continues to be spurred by Ampere/GeForce 30 series GPUs, he added.

Data center, according to the analyst, saw sequential growth due to strong performances by computing and networking products going into hyperscalers.

Crypto mining processor sales came in at $155 million in the first quarter and are expected to grow to $400 million in the second quarter, the analyst said.

"NVDA is offering CMPs that can come from test-failed GPUs, which will expand gaming card supply for gamers at reduced prices, while separately addressing mining demand," the analyst wrote in the note.

Future gaming sales will likely come from upgrades to RTX technology-enabled cards, which 80% of the current installed base does not have, the analyst said. The company also sees MSRP for GeForce 30 cards to drop due to a fall in miner demand for gaming cards, in turn pushing up the volume, he added.

Despite the supply constraints, expectations are for growth into the second quarter and into the second half, with gaming and data center as driving forces, according to Pyatchanin.

Gaming, the analyst said, will benefit from the new game release lineup for the second half, coupled with back-to-school spending, and new inference products that will drive data center growth.

Related Link: Nvidia's Comprehensive Involvement In Gaming Market Continues Strong Demand: Rosenblatt

Acceleration In Data Center Key, Morgan Stanley Says: Nvidia's numbers confirm an exceptionally strong spending environment, with gaming revenues doubling, Morgan Stanley's Moore said.

The analyst expects gaming strength to be sustained for a few more quarters, as work-from-home likely expanded the PC gaming hobby.

Nvidia's heavy investment into establishing real-time ray tracing, an advanced rendering technique, is also helping, the analyst said.

Rival Advanced Micro Devices, Inc. AMD, which is wafer constrained, is likely to be favoring CPUs and consoles over discrete graphics, boosting Nvidia's market share, he added.

The July guidance, which is $800 million above published expectations at $6.3 billion, still points to very robust demand, Moore said. The pace of acceleration in data center, according to the analyst, will be key going forward, given likely deceleration in gaming/crypto next year.

KeyBanc Says Data Center, Gaming Growth Sustainable In Second-half: Gaming demand is likely to be sustained through the second half, given the majority of the installed base has not yet upgraded to RTX GPUs with ray tracing, KeyBanc analyst Vinh said.

"NVDA expects gaming to grow sequentially into F2Q and continue to grow into 2H21 as additional capacity comes online," the analyst said.

Increased supply of cryptocurrency mining processors is expected to address mining demand and ensure greater GPU supply for gamers, Vinh noted.

Nvidia's Multiple Is Appropriate, Raymond James Says: Removing mining capabilities from newly manufactured gaming cards de-risks gaming segment revenue, which is highly likely to grow further in the second half, Raymond James analyst Caso said. This will be facilitated by increased supply to service pent-up demand for the core gaming customers, he added.

"The stock now trades at 37x our FY23 EPS — but with a 5-year revenue CAGR in excess of 35%, we think that multiple is fully appropriate," Caso wrote in the note.

"…we're willing to pay it for the continued opportunities we expect in data center coupled with what's proven to be a sustainable franchise in gaming," he noted.

NVDA Price Action: At the last check, Nvidia shares were down 0.83% at $622.80.

Related Link: Nvidia Soars Into Earnings: What's Next?

(Photo: Nvidia)