Sell-Side Largely Bullish On Nvidia, With Eye On Anticipated Second-Half Recovery

NVIDIA Corporation NVDA held its investor day Tuesday in conjunction with its GTC Developers Conference.

The Analysts

• Bank of America Merrill Lynch analyst Vivek Arya maintained a Buy rating and a $193 price target for Nvidia shares.
• RBC Capital Markets analyst Mitch Steves maintained an Outperform rating and $180 price target.
• Raymond James analyst Chris Caso has an Outperform rating and $180 price target.
• MKM Partners analyst Ruben Roy has a Neutral rating and $170 price target.

BofA: Tech Leadership, Data Center, Gaming Recovery To Boost Earnings Power

Nvidia used the analyst day as a platform to expand on the announcements made at the GPU conference, presenting its unique programmable accelerated domains architecture, Arya said in a Wednesday note.

Nvidia did not provide any financial update, but reiterated that excess gaming inventory is on track to be cleared by the first quarter and that the pause in data center spending was only transitory, the analyst said.

BofA sees the company's tech leadership in several growth markets and the second-half data center/gaming-led estimate recovery catalyzing it toward the sell-side firm's projection of $10 in long-term EPS power.

See also: Nvidia Shares Spike Higher Following Q4 Earnings Beat

RBC Takes Positive View Of Analyst Day

Steves named five reasons for his positive take on Nvidia's analyst day: 

• Nvidia reiterated its first quarter and fiscal 2020 estimates.
• An expanding total addressable market, or TAM, in data center.
• Continued growth in gamers and esports viewership.
• $30-billion TAM for auto, with over 80 partners on the Xavier platform.
• A notable data center opportunity.

Raymond James: Platform Approach To Yield Sustainable Competitive Advantage

Among the multiple initiatives discussed, Nvidia sounded upbeat on the data science market, with the opportunity likely to be larger than AI training, Caso said in a Tuesday note. 

Nvidia's approach of creating new markets with a platform approach is likely to give a more sustainable competitive advantage, the analyst said. 

The analyst said data science is likely to be the next big market, with Nvidia likely to participate through multiple channels —  namely cloud, RTX Server and data science workstation.

On the flip side, Caso sees Nvidia's limited discussion on inferencing as suggesting that the inferencing opportunity may take a longer time to materialize.

Since Nvidia did not shed much light on the Mellanox Technologies, Ltd. MLNX integration, Raymond James said the acquisition is apparently more a defensive one. The firm expects 36-cents-per-share in annual accretion from the deal after it closes, which is expected to occur by the end of calendar 2019.

MKM Partners Awaits Visibility Into Second Half Recovery

Nvidia's updates continue to underline the large and growing market opportunities that it expects to address from the longer-term perspective, Roy said in a Wednesday note. 

"While we remain positive on NVDA's longer-term prospects, we await better visibility into [second half] recovery ahead of taking a more constructive stance on shares," the analyst said.

The Price Action

After advancing 4 percent Tuesday, Nvidia shares were slipping 0.15 percent to $175.44 at the time of publication Wednesday. 

Related Link: Analysts: Nvidia Needs A Big Second Half Of 2019

Photo courtesy of Nvidia.