Nvidia (NVDA) is scheduled to report results of its first fiscal quarter after the market close on Wednesday, May 25, with a conference call scheduled for 5:00 pm ET. What to watch for:
GAMING INDICATORS NOT FAVORABLE: Ahead of the company's first quarter results, UBS analyst Timothy Arcuri also cut the firm's price target on Nvidia to $280 from $350 but maintained a Buy rating on the shares. The analyst believes Nvidia should see another strong set of results and sees guidance biased higher thanks to data center strength, with gaming "unlikely to fall off enough quite yet" to create the risk to numbers that many investors fear. Arcuri warned, however, that gaming indicators are "clearly not favorable," with key AIB partners such as Gigabyte and MSI posting significant deceleration in revenue and rising inventory.
Meanwhile, Bernstein analyst Stacy Rasgon lowered the firm's price target on Nvidia to $225 from $325, keeping an Outperform rating on the shares ahead of quarterly results. The analyst noted Nvidia's stock has been recently "awful," a victim of the growth selloff and worries building around gaming GPUs.
STOCK TO STRUGGLE: Keeping a Neutral rating on the shares, Wedbush analyst Matt Bryson lowered the firm's price target on Nvidia last week to $190 from $300. The analyst isn't particularly concerned about Nvidia's first quarter earnings results as he expects another strong datacenter quarter should allow it to meet, if not exceed expectations. Rather, he sees any sales difficulties as more likely to weigh on Nvidia's July outlook or even October quarter results. And while his scenario analysis suggests Nvidia's valuation likely accounts for a meaningful compression in gaming revenues, Bryson also believes the stock will struggle to work until investors better understand what normalization of sales might look like and the impact on the company's results.
Meanwhile, Wells Fargo analyst Aaron Rakers had also lowered the firm's price target on Nvidia to $250 from $370 but maintained an Overweight rating on the shares. Rakers told investors that he expects Nvidia to report solid Data Center growth, and thinks Nvidia's forward commentary with regard to demand visibility, momentum, and Hopper product cycle will be a key focus. Any indications of deceleration would be an incremental negative, the analyst added.
NVIDIA COULD BE NEXT CASUALTY: Last month, Tae Kim of Barron's wrote that Nvidia's incredible winning streak could soon be coming to an end. The red-hot maker of graphics chips is facing headwinds that range from the aftereffects of pandemic-era spending to waning demand from gamers. And it could get far worse: A key crypto market development in the coming months may lead to a spectacular glut of its products, the author noted, adding that slowing business momentum would be a dramatic turn for America's undisputed chip king.
OUTLOOK: During the company's last earnings call, Nvidia said it saw first quarter revenue of $8.1B, plus or minus 2%, with consensus $8.1B, gross margin of 67%, operating expenses of $1.6B, and tax rate 11%-13%, plus or minus 1%.
