Nvidia Corp.’s stock surged Friday as analysts practically wrote Valentine’s Day notes for the company and raised their price targets after the chip company barreled past expectations in data-center sales following a tough year of revenue declines.
Nvidia NVDA, +8.86% stock surged to an intraday high of $294.40, and was last up 8.2% at $293.04, on track for its first record close in nearly a year and a half. Nvidia’s stock closed at a record $289.36 on Oct. 1, 2018.
In comparison, the S&P 500 index SPX, +0.16% and the tech-heavy Nasdaq Composite Index COMP, +0.32% were both up around 0.1%, and the PHLX Semiconductor Index SOX, +0.45% rose 0.3%.
Of the 39 analysts who cover Nvidia, 28 have buy or overweight ratings, nine have hold ratings and two have sell or underweight ratings. Of those, 21 analysts hiked price targets for an average $297.17, or 13% higher than the previous day’s average of $262.41.
Late Thursday, Nvidia not only beat Wall Street earnings estimates for the quarter but also reported $140 million more in data-center revenue than the Street had expected, reaching a record for that segment as it creeps towards $1 billion in quarterly sales. Additionally, the company’s outlook for the first-quarter also topped the Street view even after Nvidia lowered estimates by $100 million to account for expected headwinds from the coronavirus COVID-19.
Read: Nvidia shocks Wall Street with surging data-center sales
Across the board, analysts said they could find little wrong with the quarter except flat automotive sales and were in agreement that data-center sales had “crushed” expectations.
RBC Capital Markets analyst Mitch Steves, who has an outperform rating and a $350 price target, said “we’re struggling to see a negative point in the print” given record data-center revenue, record gross margins, a better than seasonal first-quarter guidance even with the $100 million estimated impact from COVID-19 and the potential tailwind from the company’s pending acquisition of Mellanox Technologies Ltd. MLNX, +0.41% which still needs clearance from Chinese regulators.
Evercore ISI analyst C.J. Muse, who has an outperform rating and a $345 price target, said Nvidia blew away expectations with its data-center numbers.
“Big picture, AI workloads are migrating from image recognition to now natural language understanding, conversational AI, and recommendation systems, driving a meaningful increase in compute requirements,” Muse said. “Add in growing breadth of customers across both hyperscale and key industry verticals as well as a complete product portfolio servicing both Training (V100) and Inference (T4), and we continue to believe NVIDIA is at an inflection for its Data Center business.”
Bernstein analyst Stacy Rasgon, who has a market perform rating and a $300 price target, said there “wasn’t much to nitpick on the quarter” but questioned how long data-center momentum could last.
“With a datacenter number that powerful (especially after a years’ worth of comparable stagnation) the NVDA story of old feels poised to come roaring back, & they delivered even as expectations had risen markedly into the print,” Rasgon said.
“The natural further question is of course around sustainability of the datacenter trajectory from here,” Rasgon noted. “Investors typically model datacenter growing sequentially into perpetuity, and the company has now set a much higher base, potentially nerve-racking as we have now seen the segment is big enough to demonstrate cyclicality going forward, especially given typical hyperscale ‘build and digest’ purchase patterns.”
The fourth quarter has proved to be a big one for chip company’s data-center sales as cloud providers and hyperscalers have opened up their capital-expenditure pocketbooks. This past earnings season, Intel Corp. INTC, +0.32% reported $800 million more in data-center sales than Wall Street had expected, while Advanced Micro Devices Inc. AMD, +1.50% also reported strong growth in data-center sales even though specifics were masked as poor console sales dragged down its combined reporting segment.
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