NVIDIA Corporation (NVDA) Could Be Circling a Key Revenue Beat, Apple Inc.’s (AAPL) Reasons to Be Bullish Dimmed by Concerns


When sizing up the bullish cases for NVIDIA Corporation (NASDAQ:NVDA) and Apple Inc. (NASDAQ:AAPL), though NVIDIA is chugging down the tracks full steam ahead, are Apple’s glory days starting to dim? Two analysts chime in with divided takes, believing that while NVIDIA stands to hit major upside thanks to a new industry alliance with Tencent and climbing expectations for Nintendo’s “Switch,” Apple’s advantages are weighed slightly down by mounting causes to be wary. Let’s explore:

NVIDIA Robust Growth Speeding Down the Track for Upside

NVIDIA just made two crucial strides forward between adding Chinese internet company Tencent Holdings to its list of clients coupled with buzz surging around Nintendo’s “Switch” game console shipments.

With Tencent using the chip giant’s GPUs as a public cloud computing service and Nintendo using the giant’s parts for “Switch,” top analyst Craig Ellis at B. Riley is out with a bullish take. In reaction, the analyst reiterates a Buy rating on shares of NVDA with a $130 price target, which represents a just under 21% increase from where the stock is currently trading.

For Ellis, these exciting developments “further show NVDA’s growth story is firmly on track and that material F18&19 estimate upside to RILY’s above-Street EPS of $3.62 and $4.50 is increasingly visible.”

“We believe list ASP’s are $5k+ and could approach $10k, though volume customers like Tencent would get a meaningful discounts. In this case we suspect AI-based workload appetite spans Tencent’s services including texting […] on-line […] and instant messaging […] and exclusive video, gaming, and music content as well as its enterprise service offerings on the Cloud platform. […] In RILY’s view this interest acceleration augurs well for strong Data Center sales growth and platform revenues which we believe could exceed $1.500B per year in a few years and approach $2.0B or more,” Ellis contends.

Additionally, with Nintendo’s Switch “target builds” jumping up from 16 million to 20 million with expectations skyrocketing by 60% to imply 25% upside, NVDA could win big from the gaming front as well. For the analyst, “[…] we see this as the latest example of product shipments and thus revenue and EPS upside optionality that uniquely exists across NVDA’s businesses.”

While it remains early to pinpoint how massively successful Switch will score with the public, the analyst concludes optimistic that at a minimum there could be a prospective $2.457 billion in NVDA Tegra sales revenue, with each $500 million in yearly sales boosting EPS by another $0.40.

Craig Ellis has a very good TipRanks score with a 78% success rate and a high ranking of #33 out of 4,555 analysts. Ellis yields 27.9% in his annual returns. When recommending NVDA, Ellis garners 71.5% in average profits on the stock.

TipRanks analytics indicate NVDA as a Buy. Out of 26 analysts polled by TipRanks in the last 3 months, 13 are bullish on NVDA stock, 9 remain sidelined, and 4 are bearish on the stock. With a return potential of 8%, the stock’s consensus target price stands at $116.45.

More stocks covered by top performing analysts can be found here.

Not Downgrading Apple, But…

Though Apple overall has solid free cash flow, a meaningful iPhone 8 launch ahead, and interesting potential in its services segment, FBR analyst Shebly Seyrafi underscores real reasons to be concerned. From Seyrafi’s perspective, if investors buy Apple shares, they should buy with eyes wide open alerted to the risks nipping at the tech giant’s heels.

Nonetheless, the analyst reiterates an Outperform rating on AAPL with a $155 price target, which represents a just under 9% increase from where the shares last closed.

On a positive note, Seyrafi acknowledges, “Over the past few weeks, many analysts have made positive statements on AAPL noting that it is about to have an iPhone 8 ‘supercycle’, services growth continues to be strong, and AAPL is investing in A/R technologies that, leveraging the company’s history of innovation, should impress when announced.”

“We get this,” the analyst explains, but adds, “However, after the tremendous run in AAPL since the ‘Buffett bottom’, investors should also be aware of the risks, and there are plenty.”

One risk lies in China, with the users there opting to use domestic brands instead, despite the tech giant’s “impressive” reputation.

Ultimately, “These concerns include significant share loss to Oppo, Vivo, and Huawei in China (and we do not see this situation improving anytime soon), challenges in penetrating India (which is 90%+ Android) due to strong competition from leader Samsung as well as very strong momentum by Oppo (up ~16x Y/Y) and Vivo (up over 6x Y/Y), a mature and slowing smartphone market (with mobile phones units expected to grow at only a .9% CAGR between 2016 and 2019), and declining iPhone gross margins,” Seyrafi concludes.

According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, three-star analyst Shebly Seyrafi is ranked #1,471 out of 4,555 analysts. Seyrafi has a 53% success rate and earns 2.1% in his yearly returns. However, when recommending AAPL, Seyrafi loses 2.4% in average profits on the stock.

TipRanks analytics show AAPL as a Buy. Based on 37 analysts polled by TipRanks in the last 3 months, 29 rate a Buy on Apple stock, 6 maintain a Hold, while 2 issue a Sell. The 12-month average price target stands at $153.07, marking a 7% upside from where the stock is currently trading.

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