NVIDIA's July Revenue Guided 15% Lower, Adds To Morgan Stanley's Valuation Concerns

In a report published Friday, analysts at Morgan Stanley maintained their Underweight rating on

. The price target was lowered from $19.50 to $18.00. The company has guided to below consensus revenue for the July quarter, along with a decline in gross margins in increase in the full year opex. The company's disappointing guidance was driven by concerns surrounding the PC segment, which appear to be having a greater impact than earlier indicated by the management. "While we were cautious on the July outlook, we were surprised at the magnitude of the weakness, with revenue falling to levels last seen in mid 2013," the analysts stated. However, the analysts are more optimistic about NVIDIA's performance in 2H. Also, despite the lowered guidance, the company has increased its buyback as well as dividend payout. In addition, the company announced in-line results for Q1, albeit with marginally lower revenue, which was offset by an increase in gross margins. More positive news came from the Autos division, which posted strong growth of 121 percent, year on year, driven by an increase in design wins. The high performance computing and cloud business also grew an impressive 57 percent, while the Grid segment continued to gain traction among consumers. The company has issued its 2Q revenue guidance at around $1.01 billion, which is significantly below the estimates and the consensus. The GAAP gross margin guidance was also below the Street's and Morgan Stanley's expectations.