Goldman Sachs Sets Expectations on Nvidia (NVDA) Ahead of FY1Q Earnings

Though Goldman Sachs' Toshiya Hari is upbeat on chances for NVDA to dish out a first quarter beat, he suggests apprehension when it comes to the second quarter guide.

In the first quarter round of tech earnings for the year, NVIDIA Corporation (NASDAQ:NVDA) is readying to serve up its showcase into the mix come next Thursday. Goldman Sachs analyst Toshiya Hari sees the bullish writing on the wall for a beat from this chip giant- especially on back of crypto mining upside and sustained Datacenter strength.

The question for Hari boils down to the second quarter guide and whether the company will deliver a raise here. Amid crypto headwinds racing in the short-term, Hari believes odds are not in favor of a guidance boost, even if the company hits upside in its first quarter earnings show.

Bigger picture, the analyst sizes up a semiconductor leader worth the short-term risk and reiterates a Buy rating on NVDA stock with a $275 price target. Notably, this implies an 18% upside from current levels. (To watch Hari’s track record, click here)

For the first quarter, Hari is 5% ahead of the Street on revenue and EPS, spotlighting growth in the maximum EGH network ETH network. Ahead of the print, the analyst gets even more confident, calling for a 56% year-over-year rise in revenue to $3.03 billion, a 62.7% gross margin, and EPS of $1.74, marking a 20% year-over-year surge. Though the analyst calls for a 4% quarter-over-quarter dip in Gaming revenue, he notes meaningfully improved seasonality compared to usual trends. Additionally, Hari spotlights a key rise in OEM revenue, a whopping 53% jump quarter-over-quarter, attributing better performances in both Gaming as well as OEM thanks to crypto. For Hari, “all eyes” will pivot to Datacenter, a segment where the analyst anticipates revenue to lift 72% year-over-year to $703 million.

Hari highlights, “We believe intra-quarter datapoints […] universally support continued expansion of the business. In Automotive, while industry datapoints have remained healthy, we believe NVDA’s business could be down yoy (we forecast -3% yoy) for the first time since the company began disclosing Automotive revenue, as the company continues its transition away from Infotainment applications and more towards ADAS/AD applications.”

Though Hari is upbeat on Nvida in his long-term perspective, he advises investors to take “caution” that the giant may not offer the “same level of upside” seen throughout the last few years. For the second fiscal quarter, the analyst sets expectations for $2.92 billion in revenue, a 31% year-over-year increase, a 63.5% gross margin, and $1.68 in EPS. Moreover, Hari calls for another 4% quarter-over-quarter dip in Gaming, noting a seasonal upturn in usual Gaping GPUs serves as simply a partial offset against a sharp decrease the analyst anticipates for crypto. Speaking of crypto concerns, the analyst watches out for a 37% quarter-over-quarter downtick in OEM revenue.

Bottom line, “The guide for FY2Q […] is unlikely in our view to deliver the upside we believe investors have become accustomed to as strength in Gaming supported by the new product launch (which we expect towards the end of the quarter) is likely to be offset by headwinds in cryptocurrency mining. Despite the potential near-term volatility, our long-term thesis on the stock is intact – we continue to see Nvidia as one of the best-positioned companies in the Semiconductor space with exposure/leadership in AI, PC gaming, and further down the road in L4/5 autonomous cars,” writes Hari.

TipRanks showcases the semiconductor player has optimism on its side when it comes to consensus opinion. Out of 25 analysts polled in the last 3 months, 16 are bullish on NVDA stock, 7 remain sidelined, while 2 are bearish on the stock. With a solid return potential of 10%, the stock’s consensus target price stands at $257.23.  

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