Shares of Nvidia (NVDA) closed down 9 cents, or 0.6%, at $14.84, and the stock received one downgrade today, after the company last night said floods in Thailand that have hampered disk drive production were affecting shipments of graphics processing units (GPU) from Nvidia in personal computers, and would impact its fiscal Q4.
For the quarter ending this month, the company sees about $950 million in revenue, below the $1.07 billion it previously forecast back in October. Up until last night, analysts had been modeling $1.06 billion, but the majority have cut their number to $979 million.
The company also said its sales of its “Tegra 2” application processor for phones and tablets dropped as it moved the new version, “Tegra 3,” into production.
Alex Gauna with JMP Securities cut his rating on the shares to Underperform from Market Perform, with a $12.50 price target.
Gauna writes, “Our primary concern with the stock is less these backward-looking and well understood developments and more so the lackluster design win picture emerging for Tegra 3 relative to rivals, the timing and nature of the Ivy Bridge refresh, and our doubts that Windows 8 can prove a meaningful driver in the 2012 timeframe.”
Gauna thinks there is some “headline risk” that competitors such as Qualcomm (QCOM) will have a stronger showing at the Mobile World Congress trade show that takes place at the end of February.
But other than Gauna, many this morning seem to be inclined to give Nvidia a pass on what they deem an extraordinary but not altogether surprising development:
Hans Mosesmann, Raymond James: Reiterates a Strong Buy rating, while cutting his price target to $23 from $28. The pre-announcement is “not all that different from Intel��s pre-announced December quarter” and actu! ally rem oves an “overhang” from the stock, he writes. “The Tegra3 ramp remains intact in our opinion, and the ARM SoC game was never going to be won or lost in CY4Q11.” The hard disk issue is more of a threat to desktop add-in graphics cards than notebooks, he thinks, and he still expects Nvidia to take notebook GPU share as machines come to market with Intel’s (INTC) Ivy Bridge processors.
Rajvindra Gill, Needham & Co.: Reiterates a Buy rating and cuts his price target to $17 from $18. “Given Intel��s preannouncement on 12/12 and AMD��s lower C1Q guidance yesterday, NVDA��s preannouncement was not a huge surprise [��] Now that a bottom has been set in the earnings level (we think F1Q), we would be aggressive buyers on any pull-back in the shares. We remain bullish for the following reasons: 1) broader traction of Tegra 3 in the smartphone market, specifically LTE quad-core smartphones, 2) strong market position on Windows-ARM based notebook platforms; 3) second-half ramp on Intel��s Ivy-bridge processors; and 4) compelling valuation (trading at 8.9x FY13 Non-GAAP EPS).” Gill cut his fiscal 2013 estimate to $4.16 billion in revenue from $4.46 billion, with $1.10 in EPS, down from $1.30 previously.
Brendan Furlong, Miller Tabak: Reiterates a Buy rating and a $20 price target. “We see the short fall in revenue and EPS for the January quarter as largely industry related due to supply chain disruptions in the PC market. Slower Tegra2 sales are a disappointment but the company does indicate that Tegra3 sales will be ramping in the current calendar quarter, which is a positive.” Furlong is enthusiastic about the company’s opportunity in “Windows-on-ARM” devices coming, assumedly, this year.
There was some grumbling, however, about where Nvidia stands in the context of very bullish forecasts just a few months ago:
Craig Ellis, Caris & Co.: R eiterates an “Average” rating while cutting his price target to $15 from $17. The company has “effectively” withdrawn the promised fiscal 2013 target model it had laid out, he thinks. “Since early-September NVDA has targeted $4.7B-5.0B in F13 revenues. [��] After our recent cuts, and even modeling in steeper F1Q-F4Q13 qq growth, our new revenue estimates fall to $4.2B/+5.1% from $4.5B/+9.7% with whopping 21% yy growth now needed to hit the target revenue mid-point, something we just don��t see.”
