NVIDIA (NVDA) Falls on Downbeat Guidance, Evercore ISI Remains a Buyer as Shares Trade Near an 'Estimated Floor of $150'

May 26, 2022 6:22 AM EDT
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Price: $151.59 -2.46%

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Shares of Nvidia (NASDAQ: NVDA) are down more than 5.5% in premarket trading Thursday after the tech giant issued downbeat revenue guidance.

Nvidia reported Q1 adjusted EPS of $1.36, topping the consensus estimates of $1.30. Revenue came in at $8.29 billion, up 46% YoY and above the analyst consensus of $8.1 billion.

The company generated $3.75 billion in data center revenue, up 83% YoY, beating the expected $3.62 billion. Gaming revenue stood at $3.62 billion in the quarter, up 31% YoY and also above the consensus projection of $3.53 billion.

Nvidia reported an adjusted gross margin of 67.1% in the period, compared to 66.2% in the year-ago period and an analyst consensus of 67%. Free cash flow totaled $1.35 billion, down 13% YoY and well below the projected $2.42 billion.

The company is calling for revenues of $8.1 billion, “plus or minus 2%,” which is lower than the consensus of $8.44 billion. The outlook includes a roughly $500 million hit from Russia and lockdowns in China.

The Q2 adjusted gross margin is seen at 67.1%, up or down 50 basis points. Nvidia stock price is also lower on the projected adjusted operating expenses of $1.75 billion, higher than the Street consensus of $1.65 billion.

The chipmaker also increased the stock buyback program to $15 billion.

Bernstein analyst Stacy Rasgon said that it is “the best to keep our 2H gaming estimates somewhat modest as a result.” Still, he remains positive overall, especially given the data center story.

“There is a lot to like in the secular story, with numerous product cycles (Hopper, Lovelace, Grace, networking etc) all coming into year-end and next year suggesting the narrative still has legs, and gaming numbers will at least start the process of coming down on the Street (important in our view). Coupled with the recent sharp pullback, investors may be willing to start (cautiously) reexamining the story,” Rasgon wrote in a note.

Evercore ISI analyst C.J. Muse reiterated an Outperform rating and a $300.00 per share price target. He also maintained his Top Pick designation on Nvidia shares.

“July Q revenues should mark a bottom with a clear path to sequential growth into both the October and January quarters. 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. With shares at $158 in the after-market, it’s time to put a line in the sand – shares are now at a point where too cheap to ignore. We are buyers tomorrow,” the analyst told clients.

By Senad Karaahmetovic

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