Susquehanna Bumps Up Price Target on Nvidia (NVDA) Ahead of Tomorrow’s Earnings, But Remains Sidelined

Susquehanna's Christopher Rolland now angles for 9% in downside potential for NVDA, even with expectations for a stronger guide.

Nvidia (NASDAQ:NVDA) is warming up to post its first quarter results for the year, one analyst still plays it cautious even as he lifts his 12-month target expectations.

Susquehanna analyst Christopher Rolland forecasts a stronger-than-anticipated earnings show as well as second quarter guide from the chip giant; especially as “new mining GPU additions and channel replenishment keep Gaming on track, while Datacenter continues to outperform.”

Though the analyst bets on an “improved outlook” from the tech leader, with “mining still helping 1Q18” and “Datacenter strong,” he notably remains wary on “modest cryptocurrency headwinds” hovering above shares.

As such, the analyst reiterates a Neutral rating on NVDA stock while jumping the price target from $200 to $230, which still implies a close to 9% downside from current levels. (To watch Rolland’s track record, click here)

For the first quarter, Rolland bets mining-related sales could yield roughly $200 million, or 6% to 7% of Nvidia’s sales, which coupled with channel restocking has odds to generate a Gaming performance that surpasses expectations. Datacenter could yield “modest” gains, considering Rolland’s checks for the new 32GB V100 cards indicated strength. Moreover, when eyeing PC-SIGnals data, the analyst underscores a rise in gaming average selling prices for the company’s graphics processing units (GPUs); albeit a bit of a dip in model share in desktops as well aftermarket GPUs in the first quarter.

“Ethereum-related GPU sales slowing, but still alive in 2Q18. After a severe correction in Ethereum coin prices, bottoming at $370 in early April, down from ~$1,400 in mid-January (ETH prices now hover around $750), we had expected little to no contribution from mining-related GPUs during the quarter. While we now expect mining GPUs to be down -50% QOQ, this will still contribute $200 million and better than feared,” writes Rolland, who spotlights a 22% lift in the Ethereum network hashrate, translating to 1.9 million new GPUs online. This marks around $400 million in mining-related GPU sales for Nvidia as well as rival chip giant AMD.

The analyst continues, “Channel replenishment may not be finished and could help support guidance. The average retail mark-up for NVIDIA graphics cards fell to +55% (down from +92% in March) above MSRP, but sizable premiums remain, perhaps a sign that channel stocking remains unfinished.”

Beyond a lift in gaming GPU ASPs, the analyst notes a decline in attach rates and share that point to “mixed” data points for the company. However, even if cautious, the analyst believes the giant has held tight to its robust share among gamers.

Ultimately, “Datacenter was a star last quarter…and could be again this quarter,” Rolland contends, who underscores Intel’s DCG outclass that resulted in 24% year-over-year growth in the first quarter, pointing to strength in dataspending as well as cloud.

TipRanks suggests optimism circulates among sell-side analysts surveying this chip giant’s prospects at play. Out of 19 analysts polled in the last 3 months, 14 are bullish on NVDA stock, 4 remain sidelined, while 1 is bearish on the stock. With a return potential of nearly 9%, the stock’s consensus target price target stands at $272.53.

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