NVIDIA Corp (NVDA)

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Have Nvidia Analysts Now Set the Bar Too Low?
By: 24/7 Wall St. | November 17, 2018

Nvidia Corp. (NASDAQ: NVDA) was up 2.6% at $202.39 ahead of the quarterly report, but the stock came down handily after earnings and guidance. While the news was far worse than Wall Street and many cautious chip investors have expected, it still is worth noting that Nvidia shares already had pulled back a whopping 30% from its peak ahead of the report.

24/7 Wall St. has tracked multiple analyst calls ahead of this report. Some reiterations have been seen, but almost all contained lower price targets. We have broken out the research reports by different groups and with more detail on some calls than others. The question to ask after all the price cuts is whether the bar is artificially lowered enough so that Nvidia can now surprise with big upside ahead. That remains to be seen, but some of the target cuts were severe enough that it is more than fair to wonder about.

We have covered more than 10 different calls for further review. Note that there are no real “pounding the table” calls in which Wall Street says the move has it all wrong and that shares are set to scream higher.

Nvidia was maintained as Buy at Goldman Sachs, but the firm removed it from the prized Conviction Buy list and lowered its target price to $200 from $283. The firm’s Toshiya Hari said:

We were clearly wrong on the stock as we underestimated the magnitude of the channel inventory build in mid-range Gaming GPUs. While we view the inventory correction in Gaming as a one-time reset as opposed to a change in the long-term growth profile, we believe it could take a few quarters before the market regains confidence in the growth trajectory of the business.

The firm B. Riley FBR cut Nvidia to Neutral from Buy and lowered its price target to $190 from $240.

Merrill Lynch reiterated its Buy rating but lowered its price objective to $250 from $300. The firm’s Vivek Arya calls Nvidia best-in-class for its core business with a crypto-reset. The report said:

Disappointing results/outlook as excess channel inventory impact turned out to be much more severe ($700mn) that we thought ($300-$350mn). We are not expecting a quick recovery, and it could take 1-2 quarters for NVIDIA to regain its growth/execution credibility… Despite near term gaming headwinds, we remain confident in NVIDIA’s uniquely leverageable graphics platform and the long term potential of its 10x growth opportunities across artificial intelligence, cloud computing, autonomous cars, robotics, health care, and workstations. Although data center sales of $792 modestly missed consensus by 4%, YoY sales were +58%, and show no signs of slowing despite concerns re decelerating cloud capex.

Here were two personal tweets from my Twitter account ahead of Nvidia earnings, and it was worse than that:

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