NVIDIA Drops After Missing Q3 Forecast Estimates, Analysts Positive on Near-term Positive Catalyst

Shares of Nvidia (NASDAQ: NVDA) are down 3.5% after the chipmaker issued a weaker-than-expected Q3 forecast.

Nvidia reported $6.7 billion in Q2 revenues, which is in line with the pre-announcement. Adjusted EPS came in at $0.51 to beat the $0.50 estimate.

For this quarter, Nvidia said it expects to generate revenues of $5.9 billion, plus or minus 2%. Analysts were looking for $6.92 in Q3 revenues. The adjusted gross margin is seen between 64.5% to 65.5%, easily ahead of the estimate of 60.7%.

“We are navigating our supply chain transitions in a challenging macro environment and we will get through this,” CEO Jensen Huang said in a press release.

Citi analyst Atif Malik cut the price target to $248 from $285, although he opened a positive catalyst watch into the GTC conference on September 20, which should yield new gaming product announcements.

“Despite a sharp 40%/30%/25% 2022/23/24E EPS cut on gaming, we maintain our long-held thesis that the stock remains a data center story with major auto inflection next year… Remain Buy rated on secular AI growth and competitive moat,” Malik said in a client note.

Bernstein analyst Stacy Rasgon said the results were “weak” but expected. He is especially positive on the NVDA stock given that much of the overall risk is already priced in.

“While the results were a bit breathtaking (and not in a good way), we don't think we necessarily hate the way this is turning out. It is clear the company is under shipping gaming by a substantial amount. Datacenter is holding in well with China de-risked. Automotive is inflecting. We should never have to worry about a crypto cycle ever again. And as the dust settles we have two brand-new product cycles set to kick off within the next quarter or two. So investors looking for a de-risked profile have much to grab onto,” Rasgon explained to investors in a note.

By Senad Karaahmetovic

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