There’s no escaping the difficult macroeconomic environment as was evident in Nvidia’s (NVDA) latest quarterly report. Over the past few years, the chip giant has habitually delivered beat-and-raise results. But although the company came good this time around on the “beat” element, the “raise” factor was missing.
In F1Q23, Nvidia generated revenue of $8.29 billion, amounting to a 46.3% year-over-year increase and coming in above the $8.11 billion anticipated by analysts. Similarly for the bottom-line, Nvidia beat Wall Street’s expectations, dialing in adj. EPS of $1.36 vs. the $1.29 consensus estimate.
As expected, Data Center put in a strong performance, showing a sequential uptick of 15% to reach $3.75 billion, in the process finally overtaking Gaming as Nvidia’s main breadwinner. Additionally, given the ongoing strength amongst its clientele (Hyperscalers and Verticals), end-products (Networking and Compute), and applications – and all given a boost from the anticipated launch of the Hopper GPU in 3Q – the outlook called for more growth for Data Center for the rest of the year.
However, for the current quarter, Nvidia guided for revenue of $8.1 billion, below the Street’s $8.54 billion forecast.
Evercore analyst CJ Muse believes the weak guide was not down to slowing global consumer demand for Gaming but rather mainly on account of the Covid lockdowns in China “weighing” on Gaming demand. However, the outlook for Gaming “remains a bit uncertain,” and investors would have preferred more clarity on the expected trajectory for the segment. Nevertheless, with Chinese lockdowns being phased out, Nvidia remains “upbeat” on the outlook for 2HCY22.
And so is Muse, who thinks shares are now at a point they are just “too cheap to ignore.”
“July Q revenues should mark a bottom with a clear path to sequential growth into both the October and January quarters,” the 5-star analyst said. “We think this is enough to suggest the bottoming process for NVDA shares is coming to an end (now down -54% from 52wk high vs SOX -29%). Add in a well-intact long-term growth story and we continue to find shares nearing our estimated floor of $150 as truly compelling.”
As such, Nvidia stock remains a “Top Pick” for Muse, who reiterates an Outperform (i.e., Buy) rating along with a $300 price target. The implication for investors? Potential upside of 77%. (To watch Muse’s track record, click here)
It’s mostly Buys from Muse’s colleagues too – 27, in total – while the addition of 5 Holds can’t detract from a Strong Buy consensus rating. The average target, at $272.41, suggests shares will climb ~53% higher in the year ahead. (See Nvidia stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.