NVIDIA Corporation (NASDAQ:NVDA) investors were thrilled to see the chip giant’s third quarter’s execution soared, which has Susquehanna analyst Christopher Rolland cheering the company’s most valued players of its earnings showcase: Data Center and Gaming.
As shares fly 6% today amid enthusiastic investor sentiment post-print, the analyst may be sidelined simply waiting for better value to buy into the semiconductor stock, but he is quite optimistic on Nvidia.
Therefore, the analyst reiterates a Neutral rating on NVDA stock while bumping up the price target in a big way from $155 to $185, which represents a nearly 50% increase from current levels. (To watch Rolland’s track record, click here)
For the third quarter, Nvidia yielded an 18.2% quarter-over-quarter surge of $2.64 billion in revenue, surpassing Street-wide expectations looking for $2.37 billion. Meanwhile, net, GAAP earnings per share of $1.33 landed 38 cents above the Street’s forecasts of $0.95, which the analyst attributes to stronger-than-anticipated revenue and gross margin.
Glancing ahead to the fourth quarter, the NVDA team guided revenue to $2.65 billion at the midpoint, beating the Street’s expectations of $2.44 billion. On the heels of the print, the analyst has revised his GAAP EPS forecast to $1.16, 18 cents more bullish than the Street’s previous projections of $0.98.
Rolland cheers that even with lofty expectations, Nvidia brought to the market table quite an impressive beat: “Expectations were high… and we have to hand it to them, execution was higher. Data Center is a bona fide juggernaut and strength in Gaming was surprising, particularly as we expect the real acceleration to come with Volta next year. Lastly, we think they easily beat guidance next quarter, which appears well below seasonal.”
Holding off from joining the bulls for now, the analyst surmises: “While a strong ramp in Nintendo Switch helped, the core gaming franchise also outperformed. Truthfully, we are surprised by the strength in Gaming today on the back of older Pascal products and can only imagine what year-over-year will look like as Volta ramps next year (ASP and unit upside?). Additionally, we also believe NVIDIA should easily beat guidance, […] In short, there is a lot to love, with the exception of valuation at ~12x revenue. We would prefer to wait for a pullback to become more opportunistic (admittedly we have been waiting for a while).”
This analyst is not the only one cautiously optimistic on the chip maker, with TipRanks analytics exhibiting NVDA as a Buy. Based on 28 analysts polled by TipRanks in the last 3 months, 16 rate a Buy on Nvidia stock, 10 maintain a Hold, while 2 issue a Sell on the stock. The 12-month average price target stands at $203.80, marking a 6% downside from where the stock is currently trading.