NVIDIA Corporation NVDA reported fiscal-year second-quarter results that were slightly ahead of estimates. The company's third-quarter revenue guidance was below expectations.
The Analyst
Morgan Stanley analyst Joseph Moore maintained his Overweight rating and $273 price target for shares of Nvidia.
The Thesis
The pullback in Nvidia in the wake of an in-line quarter, impacted by a 94-percent drop in cryptocurrency revenue, and sub-seasonal guidance due to a staggered Turing launch should be used as a buying opportunity, Moore said in a note.
Moore had predicted a "noisy quarter" due to the product transitions, but didn't see a guidance shortfall coming. The analyst reasoned the shortfall may have been due to a transitional handoff, rather than a fundamental issue.
Turing chips are likely to be launched next week, with low-end products following up later, the analyst said. He expects clarity to emerge after next week's introduction of gaming products.
"This likely creates some headwind vs. seasonality, as low end demand for last generation products may pause until the new products come, but we continue to see NVIDIA taking substantial market share in 2h, while driving higher average selling prices," the note read.
As such, Morgan Stanley lowered its FY19 EPS estimates by 24 cents and FY20 EPS estimates by 13 cents, premising the action on lower sales. The firm forecasts revenues of $13 billion for FY19 and $15 billion for FY20.
The Price Action
In pre-market trading, Nvidia shares were down 2.2 percent to $251.60.
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