As Nvidia (NASDAQ:NVDA) readies to post its first quarter earnings for the year this Thursday, one bull believes Data Center and Gaming revenue to the second quarter revenue guide will all be under the investor spotlight.
RBC Capital analyst Mitch Steves anticipates the chip giant’s Data Center could yield roughly $700 million bogey, marking 15% quarter-over-quarter growth, and Gaming could circle $1,800 million bogey, or approximately 3.5% quarter-over-quarter growth.
Ahead of the print, the analyst reiterates an Outperform rating on NVDA stock with a $285 price target, which implies an 18% upside from current levels. (To watch Steves’ track record, click here)
“Looking forward, given the company’s historical conservative guidance, we think up low-singles (1-3%) sequentially would be enough to appease investors at current valuation levels. Beyond these key numbers we think investors will then circle on the thematic stories: (i) Data Center growth – AI workloads; (ii) autonomous driving and ramp expectations given current pause; and (iii) the recent Bitmain announcement and impact to crypto currency related revenues. Net/net: with a recent pullback in the stock we think the numbers are achievable. Our one concern is the impact from Bitmain’s Ethereum miner; however, we think this will be overlooked considering the tailwinds from core gaming, Data Center and Auto,” writes Steves, who sees a $12 EPS upside case for the giant in two years.
Especially with the new DGX-2 fresh on the market, the analyst believes investor attention will be peeled to see if Data Center sales can fire back up. Meanwhile, with prospects in the automotive arena, the analyst highlights a “next phase of growth” including average selling price upside that could hit here, thanks to opportunities with Tesla, Uber, and BMW.
Steves concludes that even though Bitmain’s new miner is on the loose, “The two key drivers for gaming over the next 6 months should be switch revenues remaining strong; and core gaming demand remaining solid due to increasing game size. Finally, we think VR units could become more material in CY19.”
TipRanks indicates optimism circles NVDA stock on the Street. Out of 26 analysts polled in the last 3 months, 17 are bullish on Nvidia, 7 remain sidelined, while 2 are bearish on the stock. With a return potential of nearly 8%, the stock’s consensus target price stands at $258.00.