Story updated at 9:55 to reflect market activity.
NVIDIA fell -2% to $18.55 in morning trading.
The chipmaker's margins seem to be at risk according to analysts Michael McConnell and Hans Chung.
"Concurrent with high-end desktop GPU oversupply, we believe NVDA has increased Quadro sell-in targets (70%+ gross margin) to 10-15% q/q growth for FQ2, well above sell-through forecasts of 3-5% q/q growth, raising risk of excess inventory exiting this quarter," the analysts wrote. "NVIDIA's capital return strategy seems to be running out of gas due to low domestic cash and the end of Intel cash payments in 1Q16. Based on our SOTP analysis, a Tegra mobile exit also appears priced into NVDA at current levels."
Separately, TheStreet Ratings team rates NVIDIA CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate NVIDIA CORP (NVDA) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, reasonable valuation levels, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 3.1%. Since the same quarter one year prior, revenues rose by 15.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 84.61% and other important driving factors, this stock has surged by 28.96% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, NVDA should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Semiconductors & Semiconductor Equipment industry. The net income increased by 75.3% when compared to the same quarter one year prior, rising from $77.89 million to $136.52 million.
- NVIDIA CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NVIDIA CORP reported lower earnings of $0.74 versus $0.90 in the prior year. This year, the market expects an improvement in earnings ($0.89 versus $0.74).
- You can view the full analysis from the report here: NVDA Ratings Report