Shares of Nvidia Corp. (NVDA) fell 1.2% to close at $146.45 on Monday after analysts at Bernstein downgraded the stock to market perform from outperform because the firm expects the semiconductor manufacturer to continue to struggle in the midterm.
Analyst Stacy Rasgon also slashed the company's price target to $175 from $250.
"Following the company's somewhat chilly guidance cut ... we believe the shares are likely to remain hamstrung," Ragson wrote. ""The latest cut appears much more fundamentally demand-driven, with the question of the 'true' run-rate of the gaming business remaining up in the air for now."
Nvidia is set to release its quarterly earnings on Thursday, but expectations have been tempered after the company cut its revenue guidance for the fourth quarter.
The company now expects revenue to come in at $2.2 billion in the quarter, down from its previous guidance of $2.7 billion. The weakness is due to gaming and datacenter revenue that was below company guidance.
Wall Street expects the company to report revenue of $2.27 billion and earnings of 65 cents a share.
"Q4 was an extraordinary, unusually turbulent, and disappointing quarter. Looking forward, we are confident in our strategies and growth drivers," said Nvidia CEO Jensen Huang. ""The foundation of our business is strong and more evident than ever - the accelerated computing model NVIDIA pioneered is the best path forward to serve the world's insatiable computing needs. The markets we are creating - gaming, design, HPC, AI and autonomous vehicles - are important, growing and will be very large. We have excellent strategic positions in all of them."