Nvidia (NVDA) Stock: Short-Term Pain, Long-Term Gain?


Nvidia (NVDA) is slated to release earnings this week, though most on Wall Street aren’t expecting too much.

The U.S.-based graphics card maker, which saw its stock increase 9x over a three-year period before plummeting 50% last year, is expected to show continued poor results as a result of a major downturn affecting the entire chips market. The chips market is known for its highs and lows, but this low period was particularly troubling for the industry, as demand waned while supply ran high, contributing to lower selling prices (and revenue).

But Oppenheimer’s top analyst Rick Schafer sees some light at the end of the tunnel, as he maintains his Outperform rating on NVDA stock, with a $190 price target.

As always, we like to give credit where credit is due. According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, Schafer has a yearly average return of 16.2% and a 71% success rate. Schafer is ranked #53 out of 5,181 analysts.

The company is expected to post ~30% decrease in revenue and ~60% EPS fall, according to both guidance and analyst consensus. Crypto is a main factor, as the crypto-bubble burst contributed to lower demand and a decrease in selling prices, altogether contributing to lower sales.

However, the short-term isn’t bothering Schafer much. He is maintaining his bullish rating as he sees contributions coming in the second-half of the year. For example, the analyst says, “most expect [data center] spending to pick up in 2H,” while normal “GPU channel inventory…[sets] the stage for F2Q growth in NVDA’s core gaming segment.” Furthermore, the analyst likes “the strategic/accretive MLNX acquisition…[and believes] NVDA offers secular growth/GM expansion, a rarity in large-cap semi names.”

Wall Street is looking to the future with Nvidia. The company has become a leader in self-driving car processing chips, and is expected to reap the rewards when autonomy rises to mainstream. While Tesla recently announced it ditched Nvidia for its own chips, some actually saw that as a welcomed sign for the company. The thought is that if Tesla is being more aggressive, that may push other manufacturers to embrace Nvidia in an effort to catch up.

While this week may show poor results, TipRanks analysis of 31 analyst ratings on Nvidia shows analysts are betting on its future. There is a Moderate Buy consensus, with 19 analysts recommending Buy, ten recommending Hold and two Selling. The average price target among these analysts stand at $187.39, which implies about 11% upside from current levels. (See NVDA’s price targets and analyst ratings on TipRanks)

 

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