Barclays Issues A Rare Post-Earnings Upgrade On NVIDIA

Barclays issued a rare post-earnings upgrade as it upped its rating on NVIDIA Corporation NVDA shares to Equal Weight from Underweight following the company’s blowout quarterly results.

Superb Quarter

NVIDIA’s GAAP EPS of $0.83 handily beat Street view of $0.57 as revenue grew 40 percent sequentially to $2 billion, significantly above consensus’ $1.69 billion on broad based strength, particularly in Datacenter and Gaming.

“[W]e have been clearly on the wrong side of this one all year and given the outperformance in several segments, we can't keep our rating,” analyst Blayne Curtis wrote in a note.

Curtis noted that he doesn’t see any real threat from Advanced Micro Devices, Inc. AMD on the GPU front. Despite applauding the continued execution on NVIDIA, the analyst steps to the sidelines to re-assess the opportunities into next year.

“The biggest area of outperformance vs. our expectations was in the data center where NVDA has tripled its business y/y. While we would argue that GPUs are not the best fit for Inference applications, it is clearly still early and NVDA is in command of the market,” Curtis highlighted.

Guidance And Analyst Expectations

Further, the company guided fourth-quarter revenue to $2.06 billion–$2.14 billion, above Street’s $1.69 billion, with GAAP gross margin expected higher at 59.0 percent +/- 50bps versus Street’s 58.1 percent. This implies GAAP EPS of $0.78 - $0.84, well above consensus’ $0.56.

The analyst also raised the price target to $72 from $54.

Shares of NVIDIA closed Thursday’s trading at $67.77. In the pre-market hours Friday, the stock climbed 16.59 percent to $79.01 and set to open on a new 52-week high.