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Merrill Lynch Shares Two Cents on Nvidia (NVDA) Following Turing Gamecard Launch


Nvidia (NASDAQ:NVDA) kicked off Gamescom 2018 with an announcement of the new graphics chips for next-generation gaming computers. The Nvidia GeForce RTX 2000 series graphics cards include the GeForce RTX 2080, the RTX 2080, and the RTX 2070, based on Nvidia’s new Turing architecture.

Merrill Lynch analyst Vivek Arya is adding his two cents to the discussion: “Turing fuses traditional image rasterization techniques with ray tracing and artificial intelligence (AI) to deliver a 6x performance boost over prior generation Pascal, all else equal. In total, 3 new SKUs were announced, with launch prices set at 27-43% premium to prior-gen Pascal counterparts while providing >5x performance relative to the $1200 Pascal-based Titan Xp card (per NVDA). The potential tailwinds to ASP (mix) supports our l-t double-digit growth expectation for PC gaming overall and could spell upside versus Streets modest expectation for NVDA Gaming segment growth in CY19 (+9% YoY), in our view.”

“We expect the benefits of Turing across gaming and other segments to show-up in Q4 (Jan’19Q), since NVDA’s muted Q3 sales outlook (Oct’18Q) outlook suggests it’s a transitional quarter with current-gen Pascal inventory clearance. However, heading into Q4, consensus is modeling only 4% QoQ gaming sales growth in gaming which could prove conservative given pent-up demand for Turing and its richer ASPP. Moreover, street estimates for CY19/20 gaming growth of +9%/11% YoY could prove ultraconservative given the 74% of NVDA gamers that are in prime position to upgrade per our latest PC gaming survey,” the analyst continued.

Net net, Arya reiterates a Buy rating on Nvidia shares, with a price target of $340, which represents a potential upside of 35% from where the stock is currently trading. (To watch Arya’s track record, click here)

The Street largely seems to echo Arya’s positive sentiment on the chip giant, considering TipRanks analytics showcase NVDA as a Buy. Out of 24 analysts polled in the last 3 months, 17 are bullish on the stock, while 7 remain sidelined. With a potential upside of nearly 16%, the stock’s consensus target price stands at $291.43.