Nvidia Falls Short...And Wall Street Reacts

Technology company NVIDIA Corporation NVDA dropped more than 7 percent in trading on May 8th after it fell short of first quarter 2015 earnings expectations. Additionally, Nvidia’s guidance for the second quarter was also lower than what Wall Street expected.

The company posted earnings of $0.24 a share, matching the same quarter a year prior but missing analysts’ expectations of $0.26 a share by $0.02. Nvidia’s first quarter revenue increased 4 percent from the same quarter last year coming in at $1.15 billion but fell short of its projected revenue of $1.16 billion. The company blamed foreign exchange headwinds for missing revenue estimates.

For the second quarter, Nvidia forecasted revenue of $1.01 billion while analysts had projected $1.185 billion. The reason for Nvidia’s lackluster Q2 guidance is due to restructuring charges of about $100 million to $125 million in relation to the company’s decision to wean off its Icera modem operations in an effort to focus more on gaming, automotive, and cloud computing operations.

Nvidia also announced it will increase its dividend by 15 percent to all shareholders on record on May 21st of this year.

Jen-Hsun Huang, president and chief executive officer of Nvidia said in a statement, “The importance of visual computing is evident all around us… Our expertise in this field enables us to take a leading position to advance deep learning, virtual reality and self-driving cars… Our singular focus on visual computing is aligned with some of the most exciting growth opportunities in computing today.”

Wall Street analysts had fairly mixed reviews on Nvidia following the company’s Q1 2015 earnings results.

On May 8, Neeham & Co. analyst Rajvindra Gill reiterated a Buy rating on Nvidia with a price target of $27 despite the company’s lower sales outlook. The analyst believes the lower sales outlook was impacted by “the depreciating Euro and ongoing softness in the PC market” and that “NVDA was not alone in citing FX issues.” He noted, “The good news is the Euro is starting to appreciate and we see several growth drivers for NVDA in the C2H — gaming, auto and cloud-computing ramps. In addition, the exit of the Icera modem business has led to OPEX savings and NVDA is expecting OPEX to remain flat Y/Y, exlitigation.”

Rajvindra Gill has rated NVDA 27 times since April 2011 with a 26 percent success rate recommending the stock and a -3.9 percent average loss per recommendation. Overall, he has a 66 percent success rate recommending stocks and a +22.5 percent average return per recommendation.

Similarly on May 7, Wedbush analyst Betsy Van Hees maintained an Outperform rating on Nvidia but lowered her price target from $25 to $24 due to foreign exchange headwinds. The analyst highlighted the company’s dividend increase, noting “We expect NVDA’s increased commitment to shareholder returns to provide support to the stock and think shares will continue to trade in a tight range until the next significant catalyst.”

Betsy Van Hees has rated Nvidia 7 times since September 2011 with a 57 percent success rate recommending the stock and a +5.8 percent average return per recommendation. Overall, she has a 59 percent success rate recommending stocks and a +18.0 percent average return per recommendation.

On the other hand, Deutsche Bank analyst Ross Seymore reiterated a Hold rating on Nvidia with a $19 price target on May 8, citing that the company is “Not immune to PC headwinds.” The analyst was rather disappointed by Nvidia’s Q2 guidance, noting “While the company has invested to diversify its business outside of the PC realm, this guidance once again reminds us that the co remains heavily PC exposed (Gaming or otherwise).”

Ross Seymore has only ever given Nvidia Neutral ratings. Overall, he has a 75 percent success rate recommending stocks and a +29.8 percent average return per recommendation.

On average, the top analyst consensus for Nvidia on TipRanks is Hold.