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Analysts: Fiscal 2020 a Tough Year for NVIDIA

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Analyst ratings on NVIDIA

So far in this series, we’ve seen that NVIDIA’s (NVDA) stock declined in the fourth quarter of 2018 on the crypto bubble burst. During the quarter, the company’s earnings were hit by three headwinds:

  1. high channel inventory due to the end of crypto-related sales
  2. slow adoption of its new Turing-based RTX GPUs among gamers
  3. weak demand from data center customers due to a weak macro environment in China

Falling stock prices and cheap valuation saw analysts lower their price targets for NVIDIA. However, they retained their “buy” recommendation. Of the 34 analysts monitoring NVIDIA, 22 had a “buy” recommendation and 11 had a “hold” recommendation. Analysts had mixed recommendations for Intel (INTC) and Advanced Micro Devices (AMD).

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Analysts find NVIDIA’s fiscal 2020 guidance aggressive

NVIDIA has guided for revenue to be sequentially flat and down 31% YoY (year-over-year) for the first quarter of fiscal 2020. For fiscal 2020, it expects revenue to be flat or down slightly.

MKM Partners

According to StreetInsider, MKM Partners analyst Ruben Roy finds NVIDIA’s fiscal 2020 first-quarter guidance to be pragmatic but its full-year guidance aggressive. He believes NVIDIA will have a slow start and strong finish to fiscal 2020 but that a lack of “meaningful upside catalysts” would impact its overall fiscal 2020 growth. However, he stated that the company’s strong execution of its technology roadmap and customer engagements would drive long-term growth opportunities in gaming, artificial intelligence, and autonomous driving.

Bernstein

According to a CNBC article, Bernstein analyst Stacy Rasgon has downgraded NVIDIA over concerns around the “true” run-rate of its gaming revenue. In November, NVIDIA guided for a 7% YoY revenue decline for the fourth quarter of fiscal 2019 on the back of excess channel inventory created by the crypto bubble burst. But it reported a decline of 24% YoY, three times its previous guidance.

Rasgon believes that a 24% downside is “fundamentally demand-driven” with weak demand in gaming and cloud markets. He believes the company under-shipped 25%–40% of gaming GPUs to help clear out its inventory.

Some analysts expect NVIDIA’s stock to be range-bound until there’s some clarity around the growth in the second half of fiscal 2020. We’ill look into this outlook in the next part of this series.

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