What Wall Street Thinks Of Nvidia's Q2 Earnings

NVIDIA Corporation NVDA stock fell 5 percent Friday after the company missed market expectations with its third-quarter guidance.

Several Wall Street analysts weighed in on Nvidia stock following the earnings report. Here’s a rundown of what they had to say.

Cryptocurrency Noise

Bank of America analyst Vivek Arya said cryptocurrency noise is now gone and investors can look forward to Turing growth.

“We believe Turing and its ray-tracing capabilities and 10x inferencing benefits will have a pervasive impact across segments, and stimulate new markets in pro visualization,” Arya wrote in a note.

Citigroup analyst Atif Malik said the Nvidia story is now all about Turing.

“With crypto & data center growth concerns de-risked, investors can focus on the impact of the Turing, NVDA’s first ray-tracing GPU platform realizing a ‘40-year dream of the computer graphics industry,’ across all end markets including gaming, pro-vis and data center inferencing,” Malik wrote.

Barclays analyst Blayne Curtis said the next couple of months will be the calm before the Q4 Turing storm.

“Net net, any softness in the stock tomorrow represents an attractive buy opportunity as a new generation should lift NVDA for many quarters to come,” Curtis wrote.

Timing Issue

Deutsche Bank analyst Ross Seymore said this particular earnings report was more of a timing issue than a reflection of a fundamental change in the Nvidia thesis.

“We remain impressed with NVDA’s ability to address a wide array of rapidly growing sectors (AI Datacenter, Gaming, etc.) but continue to believe this growth potential is fairly reflected in its premium valuation,” Seymore wrote.

Oppenheimer analyst Rick Schafer said investors should keep Friday’s weakness in perspective.

“Shares could see near-term weakness following softer guidance, particularly after a strong run the past 2-3 years,” Schafer wrote.

Morgan Stanley analyst Joseph Moore thinks investors should buy the dip.

“Product transitions in gaming are always noisy,and while we did not expect a guidance shortfall - and there are certainly factors to monitor that came out of this mixed quarter - our sense is that the subseasonal guidance is more of a transitional handoff than fundamental problems in the market,” Moore wrote.

Three Mega-Waves

Loup Ventures' Gene Munster said weaker-than-expected cryptocurrency revenue has nothing to do with Nvidia’s long-term potential.

“The company remains well-positioned to capitalize on three mega-waves (datacenters, gaming, and automotive) driving growth rates of 37% in FY19, 21% in FY20, and 21% in FY21,” Munster wrote.

Stifel analyst Kevin Cassidy said expectations were extremely high heading into the report.

“Given this current semiconductor ‘peak cycle’ environment, the market will not accept a miss to estimates for any reason,” Cassidy wrote.

Turing Stutter-Step

BMO Capital Markets analyst Ambrish Srivastava said it’s been a long time since Nvidia disappointed the market. “Our FY19/FY20 estimates decrease as lower revenue, slightly lower GM and higher opex are partially offset by a lower tax rate,” Srivastava wrote.

Jefferies analyst Mark Lipacis said Nvidia’s third quarter is nothing more than a stutter step. “Our work shows gaming GPU revs often stall (stutter-step) in front of a new platform launch, but are 40-50% higher 4 qtrs later,” Lipacis wrote.

Ratings And Price Targets

• Bank of America has a Buy rating and $340 target.
• Citigroup has a Buy rating and $300 target.
• Barclays has an Overweight rating and $300 target.
• Deutsche Bank has a Hold rating and $260 target.
• Oppenheimer has an Outperform rating and $310 target.
• Morgan Stanley has an Overweight rating and $273 price target.
• Stifel has a Hold rating and $250 target.
• BMO has a Market Perform rating and $225 target.
• Jefferies has a Buy rating and $320 target.

The stock closed Friday at $244.82 per share.

Related Links:

Nvidia Gets Double Upgrade Ahead Of Earnings

Q2 13F Roundup: How Buffett, Einhorn, Loeb And Others Adjusted Their Portfolio

Photo credit: yoggy0 from Yokohama, Japan (SIGGRAPH Asia 2009), via Wikimedia Commons