Analysts see bottom in sight for Nvidia (NVDA) after better-than-feared results

Nvidia (NASDAQ: NVDA) shares are up 3% in pre-market Thursday after the chipmaker reported its third-quarter results.

Revenue came in at $5.93 billion (down 17% year-over-year), better than the consensus estimate of $5.8B. EPS were reported at $0.58, falling behind the consensus of $0.71. Q3 Data Center revenue was up 31% YoY to $3.83B while Gaming revenue grew 51% YoY to $1.57B.

“We are quickly adapting to the macro environment, correcting inventory levels and paving the way for new products,” said Jensen Huang, founder and CEO of NVIDIA.

For this quarter, the company expects revenue of $6B, plus or minus 2%, and below the consensus estimate of $6.09B. GAAP and non-GAAP gross margins are expected to be 63.2% and 66.0%, respectively, plus or minus 50 basis points.

Following the results, Summit Insights analyst Kinngai Chan upgraded NVIDIA from Hold to Buy, citing developing tailwinds for 2023, primarily in the context of a new product cycle.

JPMorgan analyst Harlan Sur reiterated an Overweight rating on Nvidia stock and a $220 per share price target as he sees the bottom in sight for gaming inventories.

"While the business is impacted by multiple near term headwinds, we believe those are beginning to abate and should set Nvidia well for growth acceleration in CY23," the analyst said in a client note.

Similarly, Morgan Stanley analyst Joseph Moore believes the numbers are bottoming. Gaming is now de-risked while Moore expects data center growth to resume from here.

"Our contacts both within the company and at customers suggest a high degree of confidence that Hopper starts to drive growth, as we see more substantial volume in the April quarter; despite overall headwinds in cloud we expect stronger sequential growth beyond this quarter," Moore wrote in a note.

By Senad Karaahmetovic

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