NVIDIA Corporation NVDA reported forecast-beating fourth-quarter results and issued upbeat guidance for the first quarter. Notwithstanding the better-than-expected earnings report, the stock is pulling back sharply on Thursday.
The Nvidia Analysts: Needham analyst Rajvindra Gill maintained a Buy rating and a $400 price target on Nvidia shares.
Wells Fargo Securities analyst Aaron Rakers maintained an Outperform rating and a $370 price target.
Credit Suisse analyst John Pitzer reiterated an Outperform rating and a $400 price target.
Rosenblatt Securities analyst Hans Mosesmann reiterated a Buy rating and a $400 price target.
Raymond James analyst Chris Caso reiterated a Strong Buy rating and a $365 price target.
KeyBanc Capital Markets analyst John Vinh maintained an Overweight rating and a $350 price target.
Needham Would Be Buyers Of Shares: Nvidia has excellent visibility into demand, especially on data center and supply, Gill said in a note. The analyst expects significant supply coming online in the second half of the year, helping ease constraints in gaming and data center.
Given the stock's 10% year-to-date drop and the 30% compression in forward multiple over the past month, the analyst said he would be a buyer of the stock.
Nvidia, Gill said, has one of the strongest financial profiles in the semiconductor industry with sales growth of 50% to 60% a year and a 47% operating margin and 70% year-over-growth in free cash flow.
Needham is excited about the "burgeoning software opportunity" for Nvidia. The company has developed three innovative software opportunities, namely Nvidia AI, Nvidia Omniverse and Nvidia Drive, the firm noted.
Related Link: Why Nvidia Is Needham's Top AI/ML Stock Pick For 2022
Data Center Momentum Key Stock Driver, Wells Fargo Says: Nvidia's data center growth momentum is the most meaningful driver of shares, Rakers said.
The 72% year-over-year and 11% sequential growth Nvidia reported for data center is a function of over 100% growth in hyperscale and cloud revenue and strong double-digit growth in vertical industries, the analyst noted.
"NVDA's F4Q22 results and F1Q23 outlook once again reinforce our belief that the company remains solidly positioned as the broadest secular large-cap growth story in semis," Wells Fargo said.
Credit Suisse Focuses On Upcoming Analyst Day: Nvidia has created a comprehensive solution that spans silicon, system and software, supporting the "largest TAM expansion and value-grab opportunity" in all of tech, Pitzer said.
Pitzer sees Analyst Day, scheduled for March 22, as the next catalyst for the stock. The event is likely to focus on four key areas, namely expanding the data center TAM from $100 billion to $200 billion, repositioning ProVis business as a key gateway to Metaverse, quantifying the acceleration in auto segment's growth and shedding light on the financial impact of software, the analyst said.
The software business will likely approach 15% to 20% of the revenues by calendar year 2030, the analyst added.
TAM expansion will likely provide ample opportunity to grow the stock's valuation and a path to more than $10 earnings per share in the next three to five years, Credit Suisse said.
Nvidia Is Rosenblatt's Favorite Secular Semi Play: Nvidia's earnings beat and guidance are pointers toward sustained accelerated broad-based demand, Mosesmann said.
The flat gross margin guidance relative to the previous quarter due to the mix shift within gaming could raise some investor concern, the analyst said. Mosesmann expects expansion to return in the coming quarters.
Nvidia is the "best-in-class" AI play with several growth vectors on the horizon such as Omniverse, next-generation networking/DPU adoption, autonomous driving and software, Mosesmann said.
Nvidia Growth Exceptional, Raymond James Says: Nvidia's data center business is now about half the size of Intel Corporation's INTC total server business and about 26% of the total data. center compute TAM after including Advanced Micro Devices, Inc. AMD, Raymond James analyst Caso said.
The growth, the analyst noted, has been exceptional. Nvidia will likely benefit from additional catalysts through the year-end, he added.
Among the upcoming catalysts are robust cloud spending, a continued catch-up of enterprise AI spending, the beginning of monetizing NVDA's $8 billion ADAS/self-driving auto pipeline, as well as the potential launch of 40-series gaming products in the second half, Caso said.
"With earnings already so strong and so many catalysts on the horizon, we continue to view NVDA as a stock that's tough not to own," the analyst said.
KeyBanc Sees Data Center Growth Accelerating: The first-quarter growth will likely be led by data center with the segment's year-over-year growth expected to accelerate, KeyBanc analyst Vinh said.
The company reaffirmed meaningful supply coming online in the second half and also said it has enough capacity to support sequential data center growth through the year, the analyst noted.
NVDA Price Action: Nvidia shares were retreating 7.12% to $246.05 Thursday afternoon at publication.
Photo: Courtesy Nvidia
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