NVIDIA Falls on Downbeat Guidance, Evercore ISI Remains a Buyer as Shares Trade Near an ‘Estimated Floor of $150’ -Breaking
By Senad Karaahmetovic
NVIDIA’s shares fell by more than 5.5% on Thursday, following a downbeat forecast for revenue.
NVIDIA Q1 Adjusted EPS at $1.36 was above the consensus estimate (1.30). Revenue was $8.29 Billion, an increase of 46% YoY. This is higher than the analyst consensus estimate of $8.1 Billion.
Data center revenues grew 83% YoY to $3.75 Billion, surpassing the $3.62 billion expected. The gaming revenue grew 31% YoY to $3.62Billion in the third quarter. It also surpassed the consensus forecast of $3.53Billion.
NVIDIA posted an adjusted gross profit of 67.1% during the period. That compares with 66.2% for the same period last year, and analysts consensus of 67%. The company’s free cash flow was $1.35 Billion, a decline of 13% YoY but still well above the $2.42 billion projected.
The company is calling for revenues of $8.1 billion, “plus or minus 2%,” which is lower than the consensus of $8.44 billion. This outlook also includes an estimated $500 million Russian hit and China lockdowns.
The Q2 adjusted margin was 67.1%. That’s an increase or decrease of 50 basis points. NVIDIA shares are also less than $1.65 billion Street consensus for adjusted operating costs of $1.75 Billion.
Chipmaker Intel also raised the amount of stock buybacks to $15 billion.
Bernstein analyst Stacy Rasgon said that it is “the best to keep our 2H gaming estimates somewhat modest as a result.” Still, he remains positive overall, especially given the data center story.
“There is a lot to like in the secular story, with numerous product cycles (Hopper, Lovelace, Grace, networking, etc) all coming into year-end and next year suggesting the narrative still has legs, and gaming numbers will at least start the process of coming down on the Street (important in our view). Coupled with the recent sharp pullback, investors may be willing to start (cautiously) reexamining the story,” Rasgon wrote in a note.
C.J. Evercore ISI Analyst C.J. Evercore ISI analyst Muse maintained an Outperform rating with a target price of $300.00. Muse also kept his Top Pick status on NVIDIA shares.
“July Q revenues should mark a bottom with a clear path to sequential growth into both the October and January quarters. This suggests that NVDA shares have reached a bottom (now down -54% vs SOX -29%). We continue to consider shares close to our $150 floor as compelling when we add in an intact long-term growth story. With shares at $158 in the after-market, it’s time to put a line in the sand – shares are now at a point where too cheap to ignore. We are buyers tomorrow,” the analyst told clients.