Needham & Company Downgrades NVIDIA (NVDA) to Hold

February 14, 2013 8:21 AM EST Send to a Friend
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Price: $17.78 +0.34%

Rating Summary:
    11 Buy, 22 Hold, 5 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 20 | Down: 27 | New: 8
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Needham & Company downgraded NVIDIA (NASDAQ: NVDA) from Buy to Hold following Q4 results and outlook.

The firm comments, "NVIDIA reported F4Q13 results that were slightly above our revised ests (we negatively previewed NVDA on 2/7) but guided F1Q14 significantly
below expectations (missed our ests by 8%, Street by 12%). While we’ve had a Buy on NVDA since Nov. 2011, the company has not performed up to investor expectations,
underperforming the SOX in CY12 (-13% vs + 4% SOX) and thus far in CY13 (-2% vs. +7% SOX). Our thesis has changed for two fundamental reasons: 1) rising OPEX growth
is outpacing revenue growth, eliminating any earnings leverage (OPEX growth of 17% Y/Y vs flat rev growth in CY13) and 2) lack of meaningful Tegra growth - limited
traction in smartphones, lackluster sell-through of MS Surface Tablet RT tablets, and share loss to QCOM in Android-based tablets. Thus, we are moving to the sidelines
and downgrading to a Hold from a Buy, and removing our 12-month price target. We acknowledge that NVDA looks inexpensive - nearly half of its market cap is in cash
($6/share) and we calculate Intel’s royalty stream is worth ~$1/share—and has an attractive dividend yield; however we expect shares to trade flat for the foreseeable
future until we see evidence that Tegra can generate a return on investment and gain share in the handset market."

The firm lowered FY14 EPS from $1.20 to $0.90 and FY15 is $0.95.

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 $12.37 yesterday.




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