Nvidia (NVDA) is slated to release fourth-quarter earnings results this afternoon, as investors are eager to see just how badly the company missed expectations. Last month, after the company warned investors that revenue would come in 18.5% short of guidance issues in November, the stock plummeted nearly 18% over a two-day period. But interestingly, shares are up more than 16% in the past two weeks, nearly erasing all losses from the news on lower revenue. Nevertheless, investors are seemingly ready to see a poor update from the chip making company. EPS is expected to fall, as short-term revenue estimates are falling as confidence on the stock is decreasing.
Nvidia had been the darling of Wall Street for some time now. The company has seen tremendous gains from its gaming and crypto products, the latter used in cryptocurrency mining. As Bitcoin and other cryptocurrencies were gaining popularity, sales of Nvidia products exploded; however, as the crypto market crashed between late-2017 and 2018, so did demand for Nvidia products. As this had been a major revenue generator, the stock’s 2018 plummet followed suit.
Even amid the panic, Susquehanna analyst Christopher Rolland remains bullish on the company, reiterating his Positive rating and $170 price target, which implies nearly 11% upside from current levels. (To watch Rolland’s track record, click here)
Rolland generally points to negative trends for Nvidia. For example, he says, “…survey share points to a slower adoption rate for Turing cards vs. prior NVIDIA generations as gamers perhaps wait for a more developed ray-tracing ecosystem.” Furthermore, the analyst says “many are banking on a push-out of deals that management notes ‘did not close’ in January” in regards to Nvidia data center products.
Rolland also looks towards Nintendo, citing a lower forecast for the Switch as concern for the stock. He says, “Nintendo sold 9.4 million units (up +30% YOY) of its Nintendo Switch console in the December quarter, but lowered its full-year forecast (F2019 ends in March) from 20 million units to 17 million units.”
It isn’t that Rolland is necessarily impressed by the company itself, but is optimistic that the market will play into its favor. For example, he says, “Since its last report, NVDA shares have fallen -9% while the SOX gained +9%. Given their history of beat and raises, underperformance represents a rare lowered bar for the company.”
Even as the stock has had a steep fall over the past year, the Wall Street community is still optimistic about the company. TipRanks analysis of 32 analyst ratings on Nvidia shows a Moderate Buy consensus, with 22 analysts recommending Buy, nine recommending Hold and one saying Sell. The average price target is $189.54, representing a 24% upside to current levels. (To see NVDA’s price target on TipRanks, click here)