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Nvidia's new chip tempers blow after results dismay Wall Street

[NEW YORK] Nvidia analysts are looking past a disappointing sales forecast and focusing on Turing, the company's new high-end chip that is scheduled to be released next week. Oppenheimer sees significant pent-up demand, while Morgan Stanley believes the launch will push lower-end product launches to later in the quarter.

As for crypto product sales, they fell to US$18 million for the second quarter, down from US$289 million in the April quarter; they "will be basically zero from here", according to Morgan Stanley.

The potential Turing demand drew an upgrade from Oppenheimer, who joined the ranks of 29 other firms that hold a buy-equivalent rating on the stock, compared with 11 who recommend holding it and one who rates it a sell, according to data compiled by Bloomberg.

Shares fell 2.8 per cent and the Philadelphia Semiconductor Index dropped 1.8 per cent.

Oppenheimer (Richard Schafer)

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Upgrade Nvidia to outperform from perform, "We see significant pent-up demand for Turing and believe estimates have reset for upside as volumes ramp. Shares could see near-term weakness following softer guidance, particularly after a strong run the past 2-3 years."

"With three solid, structural growth drivers in DC AI, gaming and autonomous,we see continued outsized growth. We're buyers with a US$310 target"

RBC (Mitch Steves)

Nvidia's third quarter guidance came in below Street expectations, "importantly with Turing announced, we think this is causing a pause in revenue growth which should reappear in Q4."

"Think investors were expecting more from Data Center which came in at US$760m (we think expectations were closer to US$775m)."

"Overall, we think the stock price dip should be bought over the next couple of weeks given that we are experiencing Déjà vu from last year (Jul-17 was also impacted by a product pause - Data Center)."

Maintains outperform and US$310 price target

Wells Fargo (Aaron Rakers)

Nvidia has a strong 2019 product cycle story and "provided confident commentary on the forthcoming Turing-based Quadro RTX and GeForce RTX (late-August intro) product cycles"

Second quarter revenues of US$3.12 billion beat estimates but "only about US$18 million crypto revenue vs about US$100 million guide)

"The company expects no crypto revenue contributions going forward – though we expect investors to continue to question potential risk in gaming."

Maintains outperform and US$315 price target

Morgan Stanley (Joseph Moore)

"NVIDIA had an in line quarter vs characteristic upside, as cryptocurrency declined by 94 per cent, and guided subseasonally, in our view due to a staggered Turing launch."

"Next week's product launch should bring clarity; we see the pullback as a buying opportunity."

"Our sense is that the company will launch high end "Turing" chips next week, and that low end products will follow later in the quarter." which will likely create some headwinds vs seasonality.

Maintain overweight and US$273 price target

Loup Ventures (Gene Munster)

"The company remains well-positioned to capitalise on three mega-waves (datacenters, gaming, and automotive) driving growth rates"

"Believe shares of NVDA have significant upside ahead of these themes."

Stifel (Kevin Cassidy)

"Nvidia turned in a slight beat to July quarter estimates but weaker than expected demand for GPUs used for crypto-currency mining led to a miss versus October ending quarter estimates."

"Given this current semiconductor 'peak cycle' environment, the market will not accept a miss to estimates for any reason."

"We are impressed with Nvidia's new Turing GPU architecture and real-time ray tracing feature."

Maintain hold and raise price target to US$250 from US$243

KeyBanc (Michael McConnell)

Second quarter revenue was modestly above KeyBanc estimates but "broad-based strength across most segments more than offsetting a sharper-than-expected decline in mining-specific GPU sales (US$18 million vs US$100 million assumed in guidance)."

"Consistent with findings from our Asia fieldwork, NVIDIA noted that channel inventory of lower-end gaming GPUs remains elevated."

"However, the Company indicated that this is not an issue due to optimism in the back-to-school season as well as prioritisation of the highest-end SKUs in the upcoming Turing ramp."

Maintain sector weight and view fair value at US$252

Bloomberg Intelligence (Anand Srinivasan)

"With Nvidia's fiscal 2Q results and 3Q guidance pressured by increasing declines in cryptocurrency, the company is banking on its newly launched Turing architecture-based product to cement its status as the leader in graphics chips."

"These chips will be available in 4Q, but new gaming GPUs may be announced in August."


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