Analysts Raise Estimates and PTs on Nvidia (NVDA) After Positive Trading Update and the First Data Center CPU Launch

April 13, 2021 7:27 AM EDT
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Shares of Nvidia (NVDA) closed over 5.6% higher Monday following a successful Investors Day. The tech company said it expects its first-quarter revenue to come in higher-than-expected, fueled by “broad-based strength” across all sectors.

The revenue for the ongoing quarter is expected to beat the $5.3 billion guidance issued during the earnings call covering the last quarter.

“Within Data Center we have good visibility, and we expect another strong year. Industries are increasingly using AI to improve their products and services. We expect this will lead to increased consumption of our platform through cloud service providers, resulting in more purchases as we go through the year. Our EGX platform has strong momentum, and we expect this will drive increased revenue from enterprise and edge computing deployments in the second half of the year,” CFO Colette Kress said in a statement.

“Overall demand remains very strong and continues to exceed supply while our channel inventories remain quite lean. We expect demand to continue to exceed supply for much of this year. We believe we will have sufficient supply to support sequential growth beyond Q1.”

Nvidia also announced it will become a major competitor of Intel (NASDAQ: INTC) in the Data Center CPU sector as it launches its first product “Dubbed Grace”. The chip is designed by Arm, the UK-based company that Nvidia is in the process of buying. Shares of Intel slid over 4% yesterday on this news.

“Leading-edge AI and data science are pushing today’s computer architecture beyond its limits - processing unthinkable amounts of data,” CEO Jensen Huang said.

Credit Suisse analyst John Pitzer reiterated the “Outperform” rating and raised the price target to $700.00 per share (the prior $620.00) after yesterday’s event confirmed the bank’s “Accelerating Compute Thesis.” Discussing yesterday’s event, Pitzer says:

“We would highlight: (1) F1Q Rev tracking ABOVE midpoint guide of $5.3bn inclusive of $150mn CMP (Crypto Mining Processor) Rev vrs guide of $50mn, (2) Gaming growth confidence with RTX only ~15% of GEFORCE installed-base, (3) Grace the 1st NVDA Arm-based CPU in 2023 aimed at HPC (~$10bn of $100bn DCG TAM), (4) Bluefield-3 w/10x improvement gen-to-gen, (5) DOCA 1.0 NVDAs Data Center Infrastructure SDK, and (6) $8bn 6 year design pipeline in Auto (only $536mn in Rev in FY21),” the analyst wrote in a note.

“While crypto and timing of DCG y/y re-accelerating remain risks, NVDA continues to find new vectors of IP monetization in highly visible, highly profitable installed base focused, and recurring software Rev which could be as much as 20% of Rev by 2025 and should continue to support multiple expansion.”

In a similar fashion, Rosenblatt analyst Hans Mosesmann says that Investors Day further solidified his belief that NVDA “remains one of our favorite secular semiconductor plays.” Along these lines, Mosesmann hiked the PT to $800.00 per share from $700.00.

“The key takeaway for us from this event is that the bulk of the massive innovation is not even silicon related, with upcoming huge recurring revenue characteristics that sport virtually all profit fall through in virtually all of Nvidia's businesses thrusts. We continue to be impressed by Nvidia's execution and are aligned with Nvidia's view that AI and accelerated computing are the path forward and the next cycle is AI,” Mosesmann said in a memo sent to clients.

In addition to Credit Suisse and Rosenblatt, analysts at Barclays ($650), Wells Fargo ($715), Mizuho ($675), Cowen ($675), and Deutsche Bank ($575) raised their price target on Nvidia.

Shares of Nvidia are down about 0.3% in pre-open Tuesday.

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