Nvidia (NASDAQ:NVDA) shares dropped 5% over trading on Friday, after the graphics card titan reported slightly better-than-expected second-quarter results, while third-quarter guidance was weak, primarily due to a $82 million headwind from roll-off in crypto mining cards.
Specifically, Nvidia reported fiscal Q2 revenue of $3.12 billion and GAAP EPS of $1.76, topping Street expectations of $3.11 billion and and $1.67, respectively. With respect to guidance, Nvidia guided for third-quarter quarter revenue of $3.25 billion, plus or minus 2%, falling short of Street forecasts of $3.34 billion.
Should investors be buyers on the dip? Not quite yet, according to Susquehanna’s Christopher Rolland. The analyst reiterates a Neutral rating on Nvidia shares, with a price target of $250. (To watch Rolland’s track record, click here)
Rolland opined, “Gross margin commentary and guidance [were] somewhat confusing and disappointing. They provided gross margin details for the mining SKUs implying significantly more accretion than Street expectations. Consistent with our Asia checks, we think they may have “binned” the GPUs with failed video components, thus salvaging scrap and realizing near 100% GMs for these parts. We believe the continued decline in crypto GPU, combined with early ramp costs for Turing and the launch of margin dilutive Founders Edition cards, may have contributed to the weaker 3Q18 GMs. We think there is a chance GMs begin to rise again in C4Q18 on the continued Turing ramp as we believe like-for-like ASPs could be as much as +20% higher. For a company that typically beats and raises, this guide may be a bit underwhelming. Regardless, there was little in this update that derails the long-term secular story.”
The rest of Wall Street largely buys into what this tech player has to offer, as TipRanks analytics reveal NVDA as a Buy. Out of 23 analysts polled in the last 3 months, 17 are bullish on Nvidia stock while 6 are bearish. With a return potential of 19.5%, the stock’s consensus target price stands at $293.55.