Top analysts are bullish on NVIDIA Corporation (NASDAQ:NVDA) and largely positive on Pandora Media Inc (NYSE:P) following strong fourth-quarter showings from each. Though NVDA is facing a dip in its Gaming segment, Needham recommends to buy nonetheless, pointing confidently to the giant’s Data center brimming with possibilities for growth. Conversely, while RBC Capital remains cautious on Pandora, the analyst shows hints of optimism, raising the price target and looking with intrigue to March’s Premium product launch. Let’s take a closer look:
NVIDIA’s Data Center Glimmers with Compelling Revenue Potential
Top analyst Rajvindra Gill at Needham maintains a bullish perspective on NVIDIA on the heels of the delivery of yet “another stellar quarter and guide.” As such, the analyst reiterates a Buy rating on shares of NVDA with a $120 price target, which represents a 1% increase from current levels.
For the fourth quarter, the chip giant posted $2.173 billion in revenue, signifying a 55% year-over-year rise and a beat compared to consensus expectations of $2.105 billion as well as management’s prior guide of $2.1 billion. Meanwhile, both gross margin at 60.2% outperformed consensus’ projection of $49.1%, which the analyst believes is “driven by GeForce gaming GPUs and Deep learning,” as well as non-GAAP EPS of $1.13 trouncing consensus of $0.98.
Meanwhile, NVDA management lifted its guidance for the first quarter of 2018 to $1.9 billion in revenue, a 59.7% gross margin, and non-GAAP operating expenses of $520 million. Ahead of the print, consensus had modeled $1.879 billion in revenue as well as a 58% gross margin. Gill notes he is “still a buyer on potential gaming slowdown,” adding that the “data center leads to way,” believing NVDA anticipates Datacenters will continue to grow.
“Revenue for the qrt was $2.173B (up 55% Y/Y) stemming from strength in the Gaming and Data center. As we expect revenue growth to decelerate in Gaming to 11% Y/Y from 44% (FY2H17 benefited from 2x the number of product launches), we believe NVDA is aligned to massive revenue TAM opportunities in AI, autonomous vehicles and VR. Data Center is on a $1.2BN revenue-run rate and could accelerate as we see GPU deployments in the cloud, hyperscale and enterprise markets, all of which are benefiting from AI and machine learning,” Gill contends.
As usual, we like to include the analyst’s track record when reporting on new analyst notes to give a perspective on the effect it has on stock performance. According to TipRanks, top five-star analyst Rajvindra Gill has achieved a high ranking of #66 out of 4,395 analysts. Gill upholds a 62% success rate and realizes 15.5% in his yearly returns. When recommending NVDA, Gill yields 12.6% in average profits on the stock.
TipRanks analytics indicate NVDA as a Buy. Out of 28 analysts polled by TipRanks in the last 3 months, 16 are bullish on NVIDIA stock, 10 remain sidelined, and 2 are bearish on the stock. With a loss potential of 2%, the stock’s consensus target price stands at $113.52.
Pandora: All Eyes on Premium Product Launch
Pandora shares took a 2% stumble yesterday despite outclassing expectations, falling an additional 2% in after-hours market trading. In January, the music streaming firm excited investors with the sneak preview indicating a revenue beat was in the cards, and the print did not disappoint.
However, perhaps elation has worn off after the preannouncement, as though both earnings as well as 2017 guidance came in strong, shares did not escalate. Though top analyst Mark Mahaney at RBC Capital takes notice of robust results for the print, he looks to a beta service-tuned-Premium-launch to hit this March as the true determinant factor to sway him from the sidelines.
Therefore, the analyst reiterates a Sector Perform rating on P while boosting the price target from $14 to $16, which represents a just under 27% increase from where the shares last closed.
For the fourth quarter, the firm brought in a revenue beat of $393 million, which the analyst underscores as “well ahead” of the Street’s forecast for $374 million. Management was correct in its prediction of a beat, as revenue did indeed top the guided range of $362 to $374 million. EBITDA of $(30.4) million likewise surged ahead of the Street’s estimate of $38.7 million. However, guidance for the first quarter of 2017 did not quite meet revenue expectations of $310 to $320 million, compared to the Street’s expectations for $342 million. Additionally, adjusted EBITDA anticipated to reach ($80) to ($70) million underwhelmed the Street’s forecast calling for ($57 million).
Guidance for the year of 2017 performed better, with revenue of $1.55 to $1.7 billion “bracketing” the Street’s estimate of $1.66 billion, as well as guided adjusted EBITDA profitability for 2017 reaching beyond the Street’s projection of ($38.7) million. Accordingly, the analyst has lifted his 2017 revenue forecast up 7% and his 2018 revenue projection up 10%, with 2017 adjusted EBITDA going from negative ($17 million) to positive $4 million.
Mahaney asserts, “Overall, Q4 results were solid, as was ’17 guidance… but the moment of truth will come in March with the launch of the new Premium product – a chance for the company to reinvigorate user growth and drive Subscription ARPUs up. There is limited visibility into the success of this new product and thus we remain on the sidelines. Though we note that Pandora does start off with an established brand and ~80MM Users. We also continue to see P as having significant strategic value. And valuation – at under 2X Sales – seems undemanding.”
Moving forward, “The key for P will be the March launch of its new Pandora Premium (on-demand) product,” Mahaney surmises.
Mark Mahaney has a very good TipRanks score with a 73% success rate and a high ranking of #3 out of 4,395 analysts. Mahaney garners 21.5% in his annual returns. However, when recommending P, Mahaney loses 18.4% in average profits on the stock.
TipRanks analytics demonstrate P as a Buy. Based on 13 analysts polled by TipRanks in the last 3 months, 7 rate a Buy on P stock while 6 maintain a Hold. The 12-month average price target stands at $15.18, marking a 20% upside from where the stock is currently trading.
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