'Highest-Quality Growth Stock:' Nvidia Analyst Shrugs Off Gloomy Guidance

Nvidia Corporation NVDA cast a pall of gloom on the tech sector on Wednesday by providing underwhelming guidance for the second quarter. An Nvidia bull, however, chose to stick with his bullish stance.

The Nvidia Analyst: KeyBanc Capital Markets analyst John Vinh maintained an Overweight rating and reduced the price target from $310 to $250.

The Nvidia Thesis: Nvidia's first-quarter results were strong, coming in above KeyBanc's estimates, Vinh said in a note. The upside was led by Cloud growth that more than doubled year-over-year, thanks to strong uptake of Ampere, the analyst said.

Team Green, however, issued a soft guidance, underpinned by weak gaming demand from Russia and the China COVID-19 lockdowns, the analyst noted. The company called for a teen-percent sequential decline in gaming revenue but a year-over-year increase, he added.

Nvidia expects China demand to recover once lockdowns ease, while Russia represents about 2% of the total revenue, Vinh said, citing the company.

Related Link: Nvidia Announces New Liquid-Cooled GPUs: How It Will Double Data Center Computing Power

Despite the absence of data center sales to Russia which could mean a loss of $100 million in data center revenue in the second quarter, the company is confident of sequential growth in the data center segment for the rest of the year, the analyst said. Continued deployments of Ampere, supply improvements and the upcoming launch/ramp of Hopper will help, he added.

To account for the performance projected by the company, KeyBanc lowered its estimates and in turn its price target.

"NVDA remains one of the highest-quality growth stocks in semis," the firm said.

Price Action: Nvidia stock pulled back by 6.82% to $158.17, according to Benzinga Pro data.