NVIDIA Corporation Gets Ready to Rumble with FQ4 Results; RBC Capital Weighs In

RBC Capital's Mitch Steves recognizes a short-term run-up on NVDA shares, but continues to be encouraged on long-term opportunities.


NVIDIA Corporation (NASDAQ:NVDA) is revving up to dish out a fourth fiscal quarter print for 2018 Thursday evening and one analyst continues to stay the bullish, upbeat course for the long-term picture.

RBC Capital analyst Mitch Steves anticipates earnings will mostly meet shareholder expectations.

However, even this bull notes that for the chip giant to garner gains following earnings, Nvidia will have to yield a meaningful beat- attributing this expectation to the recent short-term rally in shares. Steves wagers it is achievable for Nvidia to hit 5% to 6% in quarter-over-quarter growth, which then will lead to Nvidia shares leveling flat to even experiencing a bit of upside.

“While the company guided revenue to be flat sequentially, we think Gaming and Data Center will help drive total company revenue growth +5-6% sequentially. We think this will be enough to hold the stock flat/up on the print and in order for the Company to see material upside, Data Center would need to grow more than double digits on a sequential basis (beating bullish buyside expectations). Net Net: while there has been a near-term run-up to start the year, we remain positive on the long-term story. It would likely take double digit Data Center growth on a sequential basis to see a meaningful move in the stock and we think expectations of mid-singles sequentially is fair (likely flat to slightly up if achieved),” Steves writes.

As far as what the analyst believes investors will hone in on for the print, Steves points to Data Center, the company’s opportunity in the automotive market, Gaming, and margins. Data Center boasts a new shipment of Volta chips. Automotive upside next might stem from self-driving technology prospects with Tesla, Uber, and BMW. Meanwhile, with crypto demand rising even more for the quarter, Steves anticipates, “investors will zero in on gaming specific demand.” Lastly, regarding margins, Steves surmises: “While gross margins are swinging higher due to data center sales, revenue leverage on the operating margin line is becoming significantly more important to see material long-term EPS growth.”

Ahead of fourth fiscal quarter earnings, the analyst reiterates an Outperform rating on NVDA stock with a $250 price target, which implies a close to 22% upside from current levels. (To watch Steves’ track record, click here)

TipRanks suggests optimism making its waves through the Street on the semiconductor stock. Based on 23 analysts polled by TipRanks in the last 3 months, 11 rate a Buy on Nvidia stock, 11 maintain a Hold, while 1 issues a Sell on Nvidia stock. Consider that the 12-month price target of $226.00 suggests nearly 6% in return potential, indicating more positive optimists on the Street than cautious.