Goldman Sachs Adds Nvidia To 'Conviction Buy' List

The semiconductor trade has run out of gas a bit in 2018, with the Market Vectors Semiconductor ETF SMH down nearly 1 percent year-to-date. However, NVIDIA Corporation NVDA stock is up another 23.8 percent in 2018, and one analyst says there’s plenty of upside remaining for Nvidia.

The Analyst

On Thursday, Goldman Sachs analyst Toshiya Hari reiterated his Buy rating for Nvidia, reduced his price target for the stock from $324 to $305 and added Nvidia to Goldman’s Conviction Buy list.

The Thesis

The recent pullback in Nvidia has created a buying opportunity. Although Hari's earnings outlook isn’t quite as bullish as it has been in the past thanks to macro headwinds, he said Nvidia still has plenty of bullish catalysts ahead.

“We expect idiosyncratic growth drivers such as its product cycle in Gaming and potential share gains in Data Center and Professional Visualization to contribute to earnings and stock price outperformance, particularly within the context of decelerating growth in the Automotive (only 5% of NVDA revenue) and Industrial (minimal direct exposure),” Hari wrote in a note.

Hari reduced his Q4 fiscal 2019 EPS estimate by 17 percent from $2.28 to $1.90, but said the long-term Nvidia thesis remains intact. He said investors should keep expectations low for Q4, especially for what he says will be a transitional quarter for the company’s gaming segment. Hari is forecasting 5 percent gaming revenue growth in Q4 as Nvidia digests low- and mid-range inventory build.

Price Action

Nvidia stock was down 1.5 percent Thursday to $239.31 per share.

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