Profit Taking Aside, Wall Street Sees Powerful 2020 for Nvidia

Technology

Published: November 16, 2019 7:05 am

Last Updated: January 30, 2020 1:04 pm

Nvidia Corp. (NASDAQ: NVDA) is one of those semiconductor-related companies that investors had high hopes for heading into earnings. The company reported adjusted earnings per share (EPS) of $1.78 and $3.01 billion in revenues, beating expectations of $1.57 per share and $2.91 billion in revenue. That might have sent many stocks higher, but Nvidia is a high-flyer that has recovered handily, and those results were down from $1.84 in earnings per share and revenue of $3.18 billion in the same quarter a year earlier.

Where things get interesting is that Wall Street’s own internal reaction has moved back to a “risk-on” mode in Nvidia, despite the negative reaction to earnings. Many analysts on Wall Street raised expectations for next year, fiscal year 2021, as well.

Nvidia’s guidance for the current quarter was for revenue of $2.95 billion (plus or minus 2%) and strong sequential growth in its data center business being offset by seasonal declines in its notebook GPUs and its system-on-a-chip (SOC) modules. While the company did not offer a direct earnings forecast initially, the weakness in gaming may be offset by the company’s growth initiatives in the coming year, and next year is expected to return back to revenue growth.

The reaction from Wall Street was literally nothing more than an analyst brigade of price hikes. Some of the price hikes were substantial. It is important to keep in mind that this stock was already up 57% year to date and up over 30% in the prior 90-day period, but even the analysts who worry about sky-high valuations joined in on raising their target prices for the next year.

Nvidia was reiterated as Outperform with a $243 target price at Wedbush Securities, with the view that its strong data center revenues and robust guidance support optimism around the data center business.

Merrill Lynch reiterated its Buy rating and raised its price objective to $275 from $250. The firm noted game console seasonality holding its numbers down, but it sees Nvidia as a top large-cap pick with double-digit data center growth returning and sees the next catalyst for the stock coming from a CEO presentation at the Supercomputing tradeshow next week.

CFRA has a Hold rating on Nvidia, but the firm raised its target to $220 from $215 and noted that it sees the company’s growth being above peers. It also is encouraged by strong hyperscale and gaming strength and sees AI workloads and a need for inferencing capabilities driving data center growth.

Other analyst changes without reference are shown below:

Craig Hallum raised its official rating to Buy from Hold with a $255 price target.
Barclays reiterated its Overweight rating and raised its target to $225 from $170.
Benchmark reiterated its Outperform rating and raised its target to $240 from $210.
Citigroup reiterated its Buy rating and raised its target price from $220 to $245.
JPMorgan reiterated its Overweight rating and raised its target to $237 from $200.
Mizuho reiterated its Buy rating and raised its target from $185 to $230.
Morgan Stanley maintained its Equal Weight rating but raised its target to $217 from $180.
Nomura/Instinet maintained its Neutral rating but raised its target from $147 to $200.
SunTrust Robinson Humphrey reiterated its Buy rating and raised its target to $240 from $216.
Wells Fargo reiterated its Outperform rating and raised its target from $220 to $240.

Nvidia shares traded down 2.3% at $204.90 on Friday afternoon, in a 52-week range of $124.46 to $211.86.