Nvidia's Data Center An 'Aberration,' While Marvell Numbers Will Likely Be 'Generally Good' As Earnings Approach, Morgan Analyst Says

Morgan Stanley analyst Joseph Moore reiterated Equal Weight on Nvidia Corp NVDA and a price target of $182. He expects gaming weakness to continue with the data center as the key as Nvidia reports its quarterly results on August 24.

The company already preannounced material weakness in gaming in the July quarter, with gaming revenues down 44% at the midpoint, to about $2 billion versus 3.6 billion. 

He would expect those revenues to remain weak in the October quarters, with a front-end loaded July quarter implying lower run rates now, with add-in card customer inventories still extremely high. 

The bigger surprise around the pre-announcement was that the data center is also below expectations; his base case assumption here is that this was an aberration and growth is still intact; the long-term trajectory here will be essential for the stock.

Moore expects NVDA's non-gaming business to drive much of the growth near-term, as he forecasts a digestion period in the gaming segment. 

He acknowledged some upside to conservative gaming numbers, as the new Lovelace product set for launch this fall should drive further enthusiasm, even as prices fall in the retail channels. 

Intense gaming and data center growth keep valuation high, Moore noted. Stock reflects a group-high P/E multiple on the core business, discounting several open-ended growth opportunities in the data center, ADAS/autonomous driving, and virtual reality, he added. 

Moore reiterated Equal Weight on Marvell Technology, Inc MRVL and a price target of $62. He generally expects good numbers here, given lead times that have come down at the margin but are still long as Marvell releases its results on August 25.

Areas to watch will include storage, the potential for inventory reduction in enterprise networking, and potentially some inventory reduction in the cloud as lead times normalize. 

Moore expects the company to sustain its market share in storage and see strong double-digit growth in 2021 and 2022. He estimates networking driving the majority of growth due to newer products and Marvell's acquisitions of Aquantia and Avera.

Continued improvements in gross margins and disciplined operating expenditure drive profitability higher, he added.

Price Action: NVDA shares traded lower by 3.32% at $172.48 on the last check Monday.