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Nvidia earnings: short of high expectations but analysts maintain bullish view

Published 08/28/2024, 11:06 PM
Updated 08/29/2024, 04:44 AM
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Investing.com-- Analysts maintained a bullish view on NVIDIA Corporation (NASDAQ:NVDA) even after some projections from the chipmaker missed expectations, with sustained demand from artificial intelligence and a robust line of products expected to underpin earnings.

Nvidia’s shares fell more than 4.5% in Thursday's premarket trading, even as the firm beat expectations with its profit for the May-July quarter. The firm also announced a bumped $50 billion buyback. 

But its revenue guidance for the current quarter- of around $32.5 billion- missed some estimates, as did its gross margin outlook. The forecasts also presented a slowing pace of growth from prior quarters.

Nvidia also confirmed that it was facing some difficulties with its Blackwell line of advanced AI chips, although they were still set for launch by the fourth quarter. 

But despite the headwinds, analysts maintained a largely bullish stance on the stock, with some brokerages even hiking their price target on the stock. 

Blackwell delay “much ado about nothing,” PT hiked- Truist 

Truist Securities said that changes to Nvidia’s Blackwell line presented a negligible impact on the firm, and that its quarterly earnings reiterated the firm’s lead in AI. 

The brokerage noted persistent, outsized growth in Nvidia’s key datacenter unit, and also flagged a “flurry of new products” that reflected broadening strength.

Truist hiked its PT on the stock to $148 from $145, and maintained a Buy rating on Nvidia, recommending that investors “look through the fog.” The brokerage also called the selldown in Nvidia shares unwarranted. 

NVDA product story back on track, Blackwell delays in the rearview- Jefferies 

Jefferies said that expectations for Nvidia’s earnings had risen sharply going into the results, and that demand for Nvidia’s current line of top-end AI chips, Hopper, remained strong. 

Jefferies noted that the firm’s current-quarter guidance was good, but not good enough.

But the brokerage said that fears of significant delays in the hotly anticipated Blackwell line were now in the rearview, and that the line was still expected to add to already robust revenue from the Hopper line. 

Jefferies maintained its Buy rating on the stock with a PT of $150, implying a 19% upside from current levels. 

Bullish view underpinned by Blackwell expectations- Wolfe Research 

Wolfe Research said that while Nvidia’s guidance did reflect a slowing pace of growth, the brokerage’s bullish view on the stock was underpinned by expectations of strong revenue growth on the eventual launch of the Blackwell line. 

But the brokerage did note that a “successful and timely” launch of the new line was key to driving Nvidia’s future earnings. 

Wolfe maintained an Outperform rating on Nvidia, with a PT of $150.

Bernstein expects sequential growth to continue, hikes PT

Following Nvidia's earnings release, Bernstein analysts raised their price target for its stock from $130 to $155.

"Overall the company continues to deliver amid high expectations, and it seems clear that datacenter sequential growth is still well in the cards into year-end," they commented.

Bernstein's team believes that “several” billion dollars of additional Blackwell revenue in the fiscal Q4 "should drive solid further sequential growth, and it feels to us that Hopper could easily continue to show sequential strength as well which might further accelerate things."

The analysts did note that the full-year margin outlook was "the one smudge" in the report, citing a slight decline as Blackwell ramps up and the H200 mix increases. Despite this, they expect the overall gross margin in FQ4 to remain "very respectable" and are confident that margins will "overall hold in fine" next year.

Buy the pullback, says Wells Fargo

Wells Fargo also raised its price target on Nvidia stock from $155 to $165 in a post-earnings note, urging investors to "buy the pullback."

"We find it hard to see the negatives in NVDA's F2Q25 print, F3Q25 guide, and/or forward-looking Blackwell cycle comments," the bank's analysts highlighted.

Unique growth at 'very reasonable' valuation: BofA

Separately, analysts at Bank of America said Nvidia's print demonstrates "unique growth at a very reasonable valuation."

BofA suggests that the stock may see volatility in the near term, as the Q3 sales outlook of $32.5 billion is only slightly above the $31.9 billion consensus and falls short of more optimistic expectations of $33-$35 billion, likely due to a delay in the Blackwell ramp by a quarter.

They also highlight rising near-term costs associated with the Blackwell ramp, with gross margins expected to be closer to 73% in Q4, compared to an estimated 75% in Q3.

But despite this, the bank urges investors to "ignore the quarterly noise," as it continues to "believe in NVDA’s unique growth opportunity, execution
and dominant 80%+ share as generative AI deployments are still in their first 1-1.5yr of what is at least a 3-4 year upfront investment cycle."

Ambar Warrick contributed to this report. 

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