Nvidia has consistently beat estimates and raised its financial forecasts over the past two years.
Courtesy Nvidia
Nvidia might not substantially raise its financial forecasts or turn in higher earnings than expected for the first quarter due to weakness in its gaming-chip business, according to Susquehanna analyst Christopher Rolland, who lowered his price target on the stock.
Rolland said the reopening of the economy, giving people more entertainment options, has led to a slowdown in the videogame-chip business. He said in a research note Wednesday that the markup over the suggested retail price for Nvidia ’s cards has declined from a high of more than 130% in mid 2021 to over 78% in January, and 23% currently.
Nvidia declined to comment or provide any guidance on the performance of its gaming segment. Companies typically don’t discuss their performance in the days leading up to their earnings reports.
The analyst kept a positive rating on the stock but lowered his target for the price to $280 from $320. Nvidia (ticker: NVDA) was down 2% to $178.25 in premarket trading on Wednesday.
The outlook for the gaming segment is less clear as businesses and economies start reopening, Rolland said. It “presents a potential intermediate-term narrative risk going into the quarter,” he wrote.
To be sure, the analyst does expect a strong result for Nvidia’s data-center segment, which he believes has grown larger than gaming. Healthy underlying demand for Nvidia’s products is being driven by hyperscale cloud computing and artificial intelligence workloads, he said.
Nvidia reports its results for the first fiscal quarter, ended in April, on May 25 after the market closes. For its fourth quarter, the chip maker reported adjusted earnings of $1.32 a share, up 69% from the year-earlier period, with revenue of $7.64 billion, up 53%. Nvidia’s gaming revenue in the January quarter rose 37% to $3.42 billion, while data-center revenue was $3.26 billion, up 71%.
Write to Karishma Vanjani at [email protected]
