NVIDIA Corporation (NASDAQ:NVDA) shares rose nearly 14% on Friday, after the chip maker posted a significant beat and raise quarter, primarily driven by upside from datacenter and auto. The company posted EPS of $0.46 on $1.31 billion in revenue, compared to consensus estimates of $0.31 in EPS on revenue of $1.27 billion.
However, Needham analyst Rajvindra Gill presently recommend investors to stay on the sidelines, reiterating his Hold rating on the stock.
Gill commented, “We clearly have underestimated NVDA’s ability to execute as well as its competitive positioning in several growth markets: auto, data center and gaming. Our earnings will go up for CY16 and CY17, however, with the stock now nearing $40, we struggle with the L-T earnings power, ex-INTC. Our CY17 Non-GAAP EPS is $1.85, ex-intc royalty, factors in 11% Y/Y revenue growth for core NVDA, accelerating from 7% Y/Y in CY16. These revenue assumptions are reasonable and we would have to see significant evidence that there could be upside to these estimates in order to argue for a higher share price.”
“We congratulate NVDA on its transformation to a platform company, but at this time we remain on the sidelines,” the analyst concluded.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Rajvindra Gill has a yearly average return of 14% and a 56% success rate. Gill has a 11.2% average return when recommending NVDA, and is ranked #55 out of 3913 analysts.