Most of the tech giants have already dialed in their latest quarterly statements, but there are still some interesting reports to come. One of these will hit the Street on Wednesday, when Nvidia (NVDA) announces F4Q (January quarter) financials.
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The shares suffered badly last year, hit by the difficult macro while Nvidia’s once main breadwinner, its Gaming business, showed signs of some serious deceleration. Add to that the fear of a pullback in Data Center (DC) too – now the main revenue generator – and Oppenheimer analyst Rick Schafer expects investors will pay “careful attention to DC commentary amidst growing concerns over hyperscale spend plans.”
That said, with Nvidia boasting a “triple play” of DC, high performance gaming, and auto, the 5-star analyst thinks the company is well-positioned for “sustained growth.”
Not only that, Nvidia is a market leader in all things artificial intelligence (AI) and Schafer views AI as “core to cloud titan build plans and likely sacrosanct even in a slowing macro.”
As for what to specifically expect, Schafer sees an “in-line/better print and an F1Q (April quarter) outlook roughly in line with consensus.”
Focused on the outlook, for F1Q, Schafer expects DC revenue – which amounts to 65% of total revs – to increase by +5% sequentially and 9% year-over-year with US hyperscale leading the way, while the analyst anticipates overall hyperscale spend will increase 7–8% this year. “If F1Q DC outlook disappoints,” Schafer added optimistically, “we think likely transitory/timing.”
As for Gaming, with channel inventory normalizing, in the second half of the calendar year, Schafer sees the segment “tracking to normal $10B/year run-rate.” And as 60% of the gaming installed base has yet to upgrade to RTX (the platform for ray tracing and AI tech), he sees a growth opportunity ahead.
All told, with the “AI-led structural growth thesis intact,” and boasting an established DC AI ecosystem “uniquely dominant/positioned,” ahead of the print, Schafer sticks to an Outperform (i.e., Buy) rating backed by a $250 price target. The implication for investors? Potential upside of 20% from current levels. (To watch Schafer’s track record, click here)
Looking at the consensus breakdown, based on 14 Buys vs. 3 Holds and 2 Sells, each, the analyst consensus rates the stock a Moderate Buy. Going by the $235.37 average target, the shares will be changing hands for ~13% premium a year from now. (See Nvidia stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
