Here's What Analysts Say About Nvidia's Puzzling Earnings

(Bloomberg) -- Nvidia Corp. shares sink 3.1 percent in New York, cutting into its rally over the past week, after the company fell victim to high expectations for its first-quarter earnings report.

Analysts covering the chipmaker universally applauded the results, which beat the highest estimates from the Street, but said investors had elevated expectations for its datacenter growth heading into the report. The company also forecast a decline in cryptocurrency mining revenue, which contributed a large part of Nvidia’s revenue beat, yet analysts including Goldman Sachs see the company benefiting from a decreased exposure to the volatile currency.

Here’s what analysts are saying about the report:

Bernstein (Stacy Rasgon)

Nvidia’s 1Q results were “once again strong, well ahead of consensus, partially on strong crypto-specific GPUs but also with upside from gaming and datacenter and very strong gross margins.”

“The biggest controversy on the call continued to be the trajectory of gaming into the second quarter and in particular what it might imply for datacenter growth given the odd seasonality in the first half of the year.”

Bernstein “believes guidance implicitly suggests another quarter of solid datacenter growth to come.”

Maintains outperform and raises price target to $300 from $275

Morgan Stanley (Joseph Moore)

“Growth remains strong across all segments.... Stronger-than-expected cryptocurrency mining in April will continue to inject noise into the story.”

“Guidance for a 65 percent decline in crypto in the July quarter significantly derisks the story, taking it down to a largely irrelevant 3 percent of sales.”

The analysts “expect new gaming products to more than offset further declines.”

Maintains overweight rating and raises price target to $273 from $258

Stifel (Kevin Cassidy)

“Nvidia turned in a solid beat” compared to the estimates, “though much of the beat came from the cryptocurrency-related revenue.”

“Due to investors’ concerns around the volatility of the cryptocurrency market, the company may not get full credit for the beat to estimates.”

“The company is executing extremely well and we believe it is fairly reflected in the Nvidia share price and valuation.”

Maintains hold and raises price target to $243 from $220

Goldman Sachs (Toshiya Hari)

“The company met what we believe were heightened investor expectations for the datacenter business.”

“With crypto now de-risked, in our view, and the new product launch in gaming ahead of us, we see positive risk-reward and would thus recommend investors to buy the stock.”

Reiterates buy and raises price target to $310 from $275

Loup Ventures (Gene Munster)

“High growth stories have high bars to clear, and the company failed to exceed expectations in the datacenter segment.”

“The Nvidia story is intact, and remains one of the best-positioned tech names for the next decade, as its products are a foundational part of the future of technology.”

RBC Capital (Mitch Steves)

“This quarter’s print represents yet another material beat-and-raise as the company has now exceeded expectations for the prior 12 quarters.”

“While gaming was a bit lighter than bullish expectations heading into the print, we think this was offset by significant gross margin expansion to 64 percent and operating margins of 44.5 percent.”

Maintains outperform and raises price target to $300 from $285

MKM Partners (Ruben Roy)

“While second-quarter revenue guidance, at $3.1 billion, is above the current consensus estimate of $2.9 billion, it is difficult to assess how medium-term gaming segment performance will materialize as seasonal demand metrics remain skewed.”

The analysts “would agree that Nvidia’s longer-term prospects in multiple growth markets remain bright, for now, given some of the near-term uncertainties around the gaming segment and given that Nvidia’s valuation remains meaningfully higher than semiconductor peers.”

Maintains neutral and raises price target to $255 from $245

Susquehanna (Christopher Rolland)

“Nvidia now faces a few headwinds that will reduce typical seasonal growth in the second quarter, including about $200 million of lower crypto and perhaps about $250 million of channel restocking benefit received in the first quarter.”

“In terms of the artificial intelligence end market, we were impressed by more than 71 percent year-over-year datacenter growth (shipments to cloud data centers doubled year-over-year), but also note a contribution from new segments like professional visualization, where customers like Columbia University have begun using Quadro for A.I."

Maintains neutral and raises price target to $250 from $230

Rosenblatt (Hans Mosesmann)

“Nvidia continues to execute flawlessly in its target markets and we are in the early days of the Volta GPU disruption in the datacenter.”

“We expect the confusion surrounding ‘seasonality’ for the July quarter to lead to some volatility in the shares today (as we previewed), however the crypto thing is no longer a relevant bear theme in our opinion.”

Reiterates buy and raises price target to $315 from $300

Citigroup (Atif Malik)

Reiterates buy and increases his bull case to $380 from $300.

“Strong gaming demand from battle royale-style games, eSports and new titles, coupled with the strength of the Volta architecture in the data center have driven Nvidia’s revenue and earnings higher and faster than expected.”

“Datacenter still has a large opportunity ahead and should grow sequentially.”

Maintains price target at $300.

To contact the reporters on this story: Jeran Wittenstein in San Francisco at jwittenstei1@bloomberg.net, Gregory Calderone in New York at gcalderone7@bloomberg.net.

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Courtney Dentch, Steven Fromm

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