Despite Near-Term Volatility, Nvidia Analyst Remains Bullish On Data Center Positioning, Gaming Dominance

NVIDIA Corporation NVDA quantified the impact of coronavirus on its top line at $100 million in its fourth-quarter earnings release in mid-February.

Since then, the viral outbreak has become a pandemic. 

An analyst at Needham looked at what lies ahead for the chipmaker in an uncertain time. 

The Nvidia Analyst

Analyst Rajvindra Gill maintained an Outperform rating on Nvidia shares with a $270 price target. 

The Nvidia Thesis

Nvidia has about 6% exposure to the automotive end market, with the chipmaker selling Xavier SoC into ADAS/AV driving applications, Gill said in a Friday note. (See his track record here.)

In conjunction with the analyst's view that the COVID-19 outbreak is impacting global automotive production, he lowered his fiscal year 2021 revenue estimate for Nvidia from $12.50 billion to $12.325 billion and EPS estimate from $7.20 to $7.05.

The automotive segment is a long-term growth driver for the company, he said. 

The weakness stemming from the segment can be offset by strength in data center, both in training and inference, Gill said. 

The segment is likely to remain strong throughout 2020 thanks to a shift to public and private cloud as a significant number of people worldwide have been forced to work from home, he said. 

"Thus, due to higher demand for cloud storage, we expect robust data center spending by hyperscalers, enterprise, and vertical customers throughout the rest of 2020."

Needham also expects gaming sales to rebound after the pandemic COVID-19, especially as the number of games with ray-tracing capabilities continues to ramp.

NVDA Price Action

Nvidia shares were down 5.08% at $242.49 at the time of publication Friday. 

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