While Nvidia (NVDA) - Get NVIDIA Corporation Report reported a strong quarter after the close on Thursday, Wall Street remains cautious on the fast-growing chipmaker. That's because visibility into when data center demand will return to healthier levels is still unclear.
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Nvidia beat earnings and revenue estimates for its fiscal year 2020 first quarter. Data Center revenue was $664 million, missing expectations by $1 million. With second quarter revenue guidance of roughly $2.55 billion, ahead of analyst consensus of $2.53 billion, the stock rose sharply after-hours on Thursday.
Then Chief Financial Officer Colette Cress said Nvidia would only issue quarterly guidance, instead of annual figures as, as Nvidia is still "experiencing...the uncertainty as a result of the pause with the overall hyperscale data centers."
The stock was rising 0.96% to $161.72 a share in early trading on Friday.
Here's what the analysts said:
Stifel, Hold, Price Target $145
"Data center demand weaker than expected," said analyst Kevin Cassidy in a note out Thursday evening after results were announced. Just before Nvidia's earnings report, Cassidy had lowered his price target from $150 "due to more dramatic slowing of data center spending and potentially lower PC GPU ASP [average selling price] in FY20 after years of increasing ASP." With Nvidia shares up 18% this year, Cassidy wrote late Thursday that "as the rate of growth slows, we expect valuation metrics will decline."
Needham & Co., Underperform
"Do not expect a data center snapback in 2H19, as demand is uneven across the hyperscalers and visibility is limited," wrote analyst Rajvindra Gill.
"With not much change to estimates, the stock trades at a multi-year P/E high of 27-28x," Gill wrote. "We believe the recent share price performance has baked in a snapback and we remain cautious until we see further evidence." In addition, "with $6.20 of Non-GAAP EPS in FY21 (CY20) and a re-rating in the P/E forward multiple closer to the overall semi group of 18-20x, we think that we could see the shares fall to $110-$120 range over the next 12 months." A fall to $110 would be a 31% drop from the current level.
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Cowen, Outperform, Price Target $195
"Management removing previously issued annual guidance leaves many questions on the slope of the recovery," as "near term visibility remains cloudy," said analyst Matthew Ramsay.
"We lower our above-consensus estimates on the slower datacenter recovery and limited visibility," wrote Ramsay in lowering his 2020 EPS estimate to $5.24 from $5.27 and his 2021 EPS estimate to $7.51 from $7.84. He maintained his relatively bullish 2020 earnings multiple of 30.6.
Goldman Sachs, Buy, Price Target $185
"Datacenter transient, in our view," analyst Toshiya Hari said. "We continue to believe that training is likely to return to growth." He added that "Compute demand continues to grow," and there is "limited competition."
"Our long-term bull thesis predicated on the company's exposure to secular growth areas (i.e., Datacenter/AI, PC gaming, ADAS/AD) and robust/ascending competitive position remains intact. We believe the company will need to deliver multiple quarters of sound execution (i.e., acceleration in growth coupled with improving margins) for the market to fully appreciate our bull thesis."
Hari raised his 2020, 2021 and 2022 EPS estimates to $4.31, $7.22 and $9.21, respectively, from $4.20, $7.16, and $9.40.