NVIDIA Stock: Are Analysts Losing Confidence?



NVIDIA (NVDA) stock had fallen over 1% in today’s trading session as of 10:50 AM ET. The stock was also down in premarket trading. We believe part of this fall could be the result of global market tensions. The fear of a spike in oil prices following the attack on Saudi Arabia is reportedly pressuring the global economy. US-China trade tensions have also put NVIDIA’s planned acquisition of Mellanox in a fix and could, therefore, make investors jittery.

A recent rating downgrade could also put pressure on the stock. On Friday, DZ Bank downgraded its rating on NVIDIA stock, according to The Fly. Reportedly, DZ analyst Ingo Wermann lowered NVIDIA’s rating from a “hold” to a “sell.” DZ Bank also cut its price target to $158.

NVIDIA dropped 1.26% on September 16 and closed at $181.94. At this closing price, its market cap stood at around $110.8 billion. Its stock was trading 37.9% lower than its 52-week high of $292.76 and trading 46.2% higher than its 52-week low of $124.46.

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Meanwhile, on a year-to-date basis, NVIDIA has gained 36.6%. Peers Advanced Micro Devices (AMD), Intel (INTC), Micron (MU), and Qualcomm (QCOM) are also up this year. AMD, Intel, Micron and Qualcomm have risen around 66.3%, 14.1%, 59.2%, and 40.7%, respectively, YTD. Further, the VanEck Vectors Semiconductor ETF (SMH) has gained 39.7%, while the S&P 500 is up almost 20% in the same period.

How have analysts changed their views on NVIDIA stock?

Overall, analysts favor a “buy” rating on NVIDIA, with 26 out of 39 analysts giving it “buys.” On September 16, 67% of analysts gave it “buy” ratings, while 26% give it “hold” ratings. Only 7.7% of analysts gave it “sell” ratings.

The number of analysts with “buy” ratings on the stock has increased over the past three months. On June 16, around 61% of the 38 analysts covering it were “buys,” and this number increased to 66% on July 16. However, last month, around 64% had “buy” ratings on the stock.

Analysts’ number of “hold” ratings on NVIDIA stock has also fallen in the past three months. On June 16, 39% of analysts had “hold” ratings on the stock, which fell to 34% on July 16, 28% on August 16, and 26% on September 16.

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The number of analysts with “sell” ratings has also increased in the past two months. In June and July, around 5% had “sell” ratings on the stock, while in the last two months, the number of analysts with “sell” ratings has increased to about 8%. This signals that most analysts are gradually shifting from “holds” to “buys” on NVIDIA.

Currently, NVIDIA analysts have a 12-month target price of $186.31 on the stock. On September 13, the stock was trading at a discount of 2.3% to analysts’ 12-month target price. Its median target price was $190.00 on the same date.

What’s ahead for NVIDIA stock?

NVIDIA stock has been struggling since last year due to the escalating trade war and the loss of cryptocurrency demand. The chip maker is also losing market share to rival Advanced Micro Devices in the GPU space.

Since October 2018, the demand for cryptocurrency has been diminishing, severely affecting NVIDIA’s gaming business—and thereby its overall revenue. Soft growth in its Turing GPUs (graphics processing unit) also led to a decline in its revenue. NVIDIA’s revenue, which previously gained in the double digits for 13 consecutive quarters, has fallen YoY (year-over-year) for the past three straight quarters.

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However, the stock has regained momentum since the company reported its upbeat fiscal 2020 second-quarter results on August 15. NVIDIA stock has returned 22.4% capital to its shareholders since its second-quarter earnings. A sequential improvement across NVIDIA’s platforms showed strength and signaled recovery in its stock.

NVIDIA is also rolling out new products and striking partnerships to regain its lost position. On September 4, NVIDIA unveiled the Quadro RTX 6000, which is an addition to its mobile workstation GPU line-up. NVIDIA has also recently partnered with Microsoft (MSFT) to offer its RTX ray-tracing technology to Microsoft’s video games. The chip maker is also in the process of making more realistic video games.

The company is also focusing on the fast-growing AI market. AI chips are in high demand and are used in supercomputers, cloud services, smartphones, data centers, and driverless cars. NVIDIA is also making efforts to turn its fast-growing data center segment around.

Growth projections

Analysts also foresee a sales growth in fiscal 2021, but a few quarters of decline. Analysts expect NVIDIA sales to decline by 8.3% in the third quarter. Analysts further expect NVIDIA’s sales to fall 8% in fiscal 2020, which ends in January 2020. However, analysts expect the company’s sales to return to growth in fiscal 2021. Its sales are expected to rise 19.8% YoY in fiscal 2021.


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