MKM Tempers Expectations Ahead of Nvidia (NVDA) Q2 Results Today

GPU giant Nvidia (NASDAQ:NVDA) will be in the spotlight when it reports second-quarter results this afternoon once the bell tolls.

MKM analyst Ruben Roy believes Nvidia’s longer-term prospects remain robust, while potential near-term headwinds and valuation keep him on the sidelines. As such, the analyst reiterates a Neutral rating on NVDA stock, with a price target of $255, which implies a slight downside potential from current levels. (To watch Roy’s track record, click here)

Roy commented, “Cryptocurrency/blockchain weakness was widely highlighted through June quarter earnings reports and, we believe, gaming expectations have moderated. NVDA shares are down 2% since April quarter earnings, slightly under performing the SOX, which is flat over the same time period.”

The analyst continued, “While nothing, in our view, has changed with NVDA’s robust longer-term prospects, we believe that the potential for moderating near-term estimate revisions, coupled with a premium valuation, will likely keep NVDA shares range-bound until GPU revenues re-accelerate. While we believe that NVDA’s positioning in multiple multi-billion dollar growth markets should warrant a premium to its peer group, we think that the current valuation reflects the company’s solid execution and mediumterm growth prospects. NVDA shares are currently trading at roughly 34x our fiscal 2020 (calendar 2019) EPS estimate versus a peer group average of approximately 17x. With this in mind, as well as the potential for more challenging compares for the Gaming and Data Center segments as we look towards the second half of the year, we remain Neutral rated on NVDA shares.

While Roy sits on the sidelines waiting for the stock to reset itself, most analysts on Wall Street anchor a bullish perspective on the graphics card titan, as TipRanks analytics showcase NVDA as a Buy. Based on 15 analysts polled in the last 3 months, 11 rate a Buy on Nvidia stock, while4 issue a Hold. The 12-month average price target stands at $292.23, marking a nearly 13% upside from where the stock is currently trading. 

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