Nomura Securities Downgrades NVIDIA (NVDA) to Neutral

Nomura Securities downgraded NVIDIA (NASDAQ: NVDA) from Buy to Neutral with a price target of $18.00 (from $23.00), citing a risk to the 2nd-half from PC gaming which represent 40-45% of sales.

Analyst Sanjay Chaurasia see several issues that could impact graphics shipments in 2H. Specifically, 1) Currency/macro issues in Europe (Euro down ~18% vs. USD since Aug-14), Japan (down ~20%) and in several Latin American countries (Brazilian down >40%). These regions combined represent roughly 30% of Nvidia’s discrete graphics sales; 2) Changes in competitive performance dynamics from AMD’s industry first HBM integrated GPU and upcoming FinFET node transitions are likely to cause an air pocket in 2H. We expect meaningful performance improvements from the launch of HBM integrated GPUs from AMD in 2H15, ahead of Nvidia (1H16). In addition, both companies are likely to move to FinFET nodes next year after shipping 28nm GPUs for more than two years now; and 3) We do not see DX12/Win10 launch as a refresh driver. Unlike prior optimizations, key focus in DX12 (graphics API) is on reducing CPU overhead and improving CPU multi-core scaling. Due to significant improvement in graphics benchmarks with DX12 (Figure 4 & 5), we think discussions could shift to upgrading CPUs (to 4 cores and higher) to improve gaming performance in existing systems.

For an analyst ratings summary and ratings history on NVIDIA click here. For more ratings news on NVIDIA click here.

Shares of NVIDIA closed at $21.86 yesterday.

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