Why Did Needham Downgrade Nvidia’s Stock?

Nvidia (NVDA) received a Sell rating from Needham analyst Rajvindra Gill today. The company’s shares closed yesterday at $138.01, close to its 52-week low of $124.46.

Gill noted:

“We are downgrading NVIDIA from a and removing our PT of $225. Although the shares have fallen sharply, we believe end demand will deteriorate further in its core markets, gaming (54% of sales) and datacenter (25%) driven by an ongoing deceleration in the Chinese economy. Moreover, NVDA’s P/E multiple of 28x (on our new FY21 est.) is significantly higher than the group’s, owing to its historical growth rate. Based on our ests., we expect gaming and data center to decline this year and look for the GM to decline 500bps to 56% and remain in that range for several quarters. Lastly, we believe the stock’s P/E multiple will witness a “re-rating” that will bring it closer to the overall group at 18-20x. of estimated non-GAAP EPS in FY21, we could see the shares fall to $100 or below.”

According to TipRanks.com, Gill is a 5-star analyst with an average return of 10.8% and a 54.0% success rate. Gill covers the Consumer Goods sector, focusing on stocks such as Everspin Technologies Inc, Smart Global Holdings Inc, and Adesto Technologies Corp.

Currently, the analyst consensus on Nvidia is a Moderate Buy with an average price target of $208.66.

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The company has a one-year high of $292.76 and a one-year low of $124.46. Currently, Nvidia has an average volume of 18.31M.

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NVIDIA Corp. engages in the design and manufacture of computer graphics processors, chipsets, and related multimedia software. It operates through the Graphics Processing Unit (GPU) and Tegra Processor segments.

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