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Nvidia Stock Lowers Revenue Guidance; Shares Down 8.3%

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Nvidia shares fell 8.3% on Monday after the company released preliminary financial results that saw revenue significantly miss expectations.

On Monday, Nvidia (NVDA) released its preliminary financial results for its second quarter of Fiscal Year 2022. Revenue is expected to be $6.7 billion – a significant miss on the company’s previous guidance of $8.1 billion. Although sales are still up 3% on a year-over-year basis, the quarter-over-quarter comparison equates to a 19% decline. As a result, shares of NVDA fell over 8%.

This decrease in revenue is attributable to weakness in its Gaming segment. Indeed, it fell 33% and 44% when compared to Q2 2021 and Q1 2022, respectively. Macroeconomic headwinds have reduced consumers’ appetite for high-priced discretionary items such as video-game consoles.

Although NVDA didn’t release any information on net earnings, it did put out its gross margin expectations. NVDA will see substantial operating deleverage as its gross margin will fall to roughly 44%. This is a far cry from the usual 60%+ that investors have grown accustomed to seeing.

This decrease is the result of $1.32 billion in charges for inventory and related reserves. Management states that these charges reflect previous long-term purchase commitments that were made when supply-chain shortages were worse. It also reflects management’s current uncertainty about macroeconomic headwinds. Nevertheless, the company’s CFO stated that NVDA’s long-term gross margin profile remains intact.

Does Nvidia Stock Pay a Dividend?

Nvidia currently does pay a dividend, which has been increasing each year since 2017. However, the dividend yield is nothing to get excited about as it only amounts to 0.08%. Since the NVDA is focused on growth, it only pays out 3.19% of its earnings as dividends.

What are Analysts Saying About Nvidia Stock?

Turning to Wall Street, NVDA has a Strong Buy consensus rating based on 25 Buys and six Holds assigned in the past three months. The average NVDA price target of $240.41 implies 38.3% upside potential.

Takeaway – Is Nvidia a Long-Term Hold?

Without a doubt, Nvidia had a difficult second quarter in 2022. However, investors with a long-term investment horizon shouldn’t be too worried about the near-term results, as the company is on the right side of many long-term growth trends. Therefore, buy-and-hold investors that can stomach the volatility may want to consider holding on to NVDA shares for the long run.


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