A Peek into NVIDIA Corporation’s Imperfect Q2 Print, Apple Inc.’s Hyped Smartphone Upgrade AR/VR Hopes


Nvidia Needed a Perfect Print

NVIDIA Corporation (NASDAQ:NVDA) shares are falling almost 6% today after posting its second quarter earnings yesterday, which may have left some of the Street puzzled considering the chip giant delivered a solid print.

So what exactly happened here that send the chip giant’s following scurrying away into the horizon?

Susquehanna analyst Christopher Rolland notes that while this was a “good” second quarter for Nvidia, what the giant truly needed this time was perfection,” considering the stock had been so strong heading into the financial results.

Among the aspects that might have dumbfounded the Street include crypto-currency mining cards earning upside- something which investors have dismissed as “low value,” as well as “DC revs that likely missed the ‘whisper’ (DC revs most highly valued), and weaker than expected GMs given the nice V100 ramp,” argues the analyst.

“First, we believe the company missed the DC ‘whisper’ and perhaps the Street’s estimates (some confusion over Factset and Street Account consensus). This is important as we believe investors value DC revenue significantly higher than all other segments (except perhaps Auto). Second, while we applaud the company for breaking out the contribution from mining specific cards, the market significantly de-values the contribution as its permanence is questionable (additionally, management admitted that some mining-related revenue is captured in Gaming),” highlights Rolland.

Next, the analyst notes he had anticipated better gross margin outlook from the giant, considering each V100 card carries ASPs exceeding $15,000 in the DGX-1 system. For those who had been buzzing that maybe Volta’s gaming products could be drawn earlier than the first half of 2018 as a defensive move to counter AMD’s Vega launch, the NVDA team verified that no advance 2017 debut would be transpiring.

Perhaps operating expense outlook threw off investor guidance, as Rolland concludes, “And lastly, opex guidance was worse than expected (somewhat understandable as they move into their new building and continue to support their growth products). In short, it was a good quarter, but not perfect… it needed to be perfect.”

As such, the analyst remains staunchly on the sidelines in his stance on the chip giant, reiterating a Neutral rating on shares of NVDA with a $140 price target, which represents a just under 10% downside from where the stock is currently trading. (To watch Rolland’s track record, click here)

TipRanks analytics demonstrate NVDA as a Buy. Out of 24 analysts polled by TipRanks in the last 3 months, 16 are bullish on Nvidia stock, 6 remain sidelined, and 2 are bearish on the stock. With a return potential of 2%, the stock’s consensus target price stands at $159.44.

Apple May Be Overshooting Public Interest in Upgrading Smartphones for AR/VR

Barclays analyst Mark Moskowitz is out with a research note on Apple Inc. (NASDAQ:AAPL) after conducting a Wireless Subscriber Survey in the back half of last month, polling respondents from the U.S., China, the U.K. to Germany.

The results? On the positive side, smartphone replacement cycles are not rising as some had been bracing would mean upgrade cycles would extend over longer periods of time. The top reason for upgrading boils down to battery life- not virtual and augmented reality, even if those are the buzzier consumer reasons dominating publicity these days. Yet, this might not be as encouraging for Apple, considering the company has worked to create strength in its AR/VR initiatives- ones which Moskowitz shrugs up as IBM’s AI hype.

Moskowitz notes, “iPhone is the lead beneficiary of potential switchers, and the iPhone users in the survey sample exhibit stronger purchasing power. As for sensitivity to larger ASPs, though, only 11% of total survey respondents indicated they are willing to pay more than $1,000 for a next-gen smartphone, but 18% of iPhone users are willing to pay more than $1,000. That last figure is still lower than the 30-35% figure that investors are targeting for sales mix related to a new higher-priced iPhone introduced later this year.”

Regarding churn levels, the analyst anticipates they will stay at a dull hum, explaining, “While we expect a seasonal pick up in promotional activity levels, historically low churn levels are likely to remain as 85% of our survey respondents indicated no desire to switch carriers in the next twelve months.”

For investors wondering whether consumers would be willing to switch carriers in the next year, T-Mobile scores number one among the respondents indicating interst in switching, with AT&T trailing afterward. “Most subscribers stay with their current operator because of the perceived difficulties of switching plans, and the perception that they already get a low priced offering with compelling enough network quality. Intriguingly, share among our sample set largely mimicked national share of the big four operators,” Moskowitz surmises, adding it all comes down to a one-two punch of service pricing-meets-network-quality to get subscribers to jump operator ship.

This analyst rates a Hold rating on AAPL with a price target of $146, which implies a 7% downside from current levels. (To watch Moskowitz’s track record, click here)

TipRanks analytics showcase AAPL as a Strong Buy. Based on 34 analysts polled by TipRanks in the last 3 months, 26 are bullish on Apple stock while 8 remain sidelined. With a return potential of 8%, the stock’s consensus target price stands at $170.43.