- ‘Developing tailwinds for 2023,’ says Summit Insights
- Q3 revenue beat forecasts, earnings weaker
- Stock has jumped nearly 35% in a month
Having lost two-thirds at one point this year, shares in microchip designer Nvidia (NVDA:NASDAQ) have now rallied nearly 35% in a month, and analysts are daring to speak of the ‘bottom’ being hit.
The Santa Clara semiconductor company is set to open a couple of percentage points higher when trading restarts on Wall Street later today after Q3 figures that were not as bad as feared.
Analysts at Summit Insights upgraded the stock to Buy, citing developing tailwinds for 2023, primarily in the context of a new product cycle.
WHAT NVIDIA REPORTED
Revenue came in at $5.93 billion, down 17% year-on-year, but better than the consensus estimate of $5.8 billion. Data Centre revenue was up 31% versus 2021 at $3.83 billion while Gaming revenue soared 51% to $1.57 billion, a big surprise given the weakening tone around gaming for much of this year.
While earnings per share missed forecasts Q3 at $0.58, versus $0.71, investors were relieved by the hint of growth improvement.
‘We are quickly adapting to the macro environment, correcting inventory levels and paving the way for new products,’ said Jensen Huang, founder and CEO of Nvidia.
For this quarter, to 31 January 2023, the company expects revenue of $6 billion, give or take a percentage point or two, with gross margins seen at around 63.2%, on a generally accepted accounting principles basis, or GAAP.
HOW ANALYSTS HAVE REACTED
JPMorgan analysts continued to tell clients to own more Nvidia in portfolios than its current 1.24% of the S&P 500, according to data from the website SlickCharts.
‘While the business is impacted by multiple near-term headwinds, we believe those are beginning to abate and should set Nvidia well for growth acceleration in calendar year 2023,’ the analysts said in a client note.
JPMorgan has a $220 target price on the stock, compared to a $198 consensus, based on Koyfin data.
Similarly, Morgan Stanley analysts believe the numbers are bottoming. Gaming is now de-risked while they expect data centre growth to resume from here.
‘Our contacts both within the company and at customers suggest a high degree of confidence that Hopper starts to drive growth, as we see more substantial volume in the April quarter; despite overall headwinds in cloud, we expect stronger sequential growth beyond this quarter,’ Morgan Stanley told clients in a note.
Pre-market data points to Nvidia stock opening at $161.50.
