NVIDIA Corporation NVDA shares jumped 6.7% on Friday after the company reported better-than-expected earnings and revenue in the second quarter. Despite a 17% drop in sales compared to a year ago, Nvidia impressed the market with $1.31 billion in gaming revenue, slightly above consensus forecasts.
The market was also reassured by Nvidia CEO Jensen Huang’s comments that Alphabet Inc GOOG GOOGL is the only major Nvidia customer currently developing its own in-house chip business.
However, critics are still concerned about Nvidia’s lofty valuation and the ongoing softness in the semiconductor market.
Several Wall Street analysts weighed in on Nvidia following the earnings beat. Here’s a sampling of what they had to say.
Solid Numbers
Bank of America analyst Vivek Arya said gross margins were a highlight of the second quarter.
“Although Q3 sales were guided in line, key upside surprise was GMs which NVDA guided to 62.5% for Q3, 200bps above our expectations, driven by improving mix within gaming,” Arya wrote in a note.
Morningstar analyst Abhinav Davuluri said Nvidia’s quarter was good enough given the difficult environment for semiconductor stocks.
“While Nvidia’s top line came in slightly above management’s midpoint, we were surprised to see notable weakness in Nvidia’s data center sales,” Davulur wrote.
Catalysts Ahead
Tigress Financial analyst Ivan Feinseth said Nvidia seems to be overcoming the issues that weighed on its performance in recent quarters.
“I believe further upside exists from current levels and continue to recommend purchase,” Feinseth wrote in his daily newsletter.
CFRA analyst Angelo Zino said ray tracing and inferencing should be bullish catalysts for Nvidia in the next couple of years.
“We think data center fundamentals will improve on expanding AI workloads from enterprise customers, while NVDA's automotive business sees growth propelled by opportunities in AI cockpit solutions and other autonomous vehicle development agreements,” Zino wrote.
Ratings And Price Targets
- CFRA has a Hold rating and $200 target.
- Bank of America has a Buy rating and $225 target.
- Mornignstar has a Hold rating and $120 fair value estimate.
Nvidia's stock traded higher by 5.8% to $157.30 per share at time of publication.
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