3 Reasons for Nvidia's Swoon
thestreet.com
JMP Securities’ Alex Gauna today reiterated an Outperform rating and a $25 price target on shares of Nvidia (NVDA), one of the six tech stocks he thinks can be a safe bet over the next two months.
In the past five years, the stock has delivered a return of 9.6% between June 30th and August 31st, better than the S&P’s 2.7%, Gauna writes.
Although the name is hardly free of controversy given its 66% sales exposure to GPUs, exposure to some poorly positioned Android platforms, and just completed Icera acquisition, we believe improving seasonal build cycles remain intact for its most promising Tegra 2 smartphone and tablet design wins as well as for its GPU products that stand to benefit this summer from back-to-school and share gains.
NEW YORK (Trefis) -- Nvidia's(NVDA_) stock has fallen by more than 20% in the past three weeks.
We think this move could be exaggerated due to recent market pessimism and some short-term thinking on how Nvidia's graphics business will hold up against AMD(AMD_) and Intel(INTC_).
Our price estimate for Nvidia stands at $21.25, implying about a 30% premium to the market price.
During this month, Nvidia's stock has slid from close to our price estimate to under $16. This has been a result of a series of negative events, including Nvidia's GPU sales disruptions in China and lingering concerns over the U.S. economic recovery. Nonetheless, while many tech stocks were able to hold up last week, Nvidia's outpaced its peers to the downside.
One of the reasons cited for AMD's fall has been that the company continues to push into PC market (for example AMD's Llano launch), which is in decline. One of the primary reasons behind the PC market weakness is the growth of tablets. If that is the case, shouldn't Nvidia gain with its Tegra line of chips which are targeted at smartphones and tablets?
The possible explanation behind this may be that Apple(AAPL_) still continues to dominate tablet sales and Android-based tablets haven't picked up as investors would have earlier expected.
It seems like Nvidia is facing competition from three fronts. While its discrete GPU sales are at risk from Intel & AMD's launch of hybrid processors, it also faces direct competition from AMD in the graphics market. To add to this, Apple's popularity now seems to be affecting the company. We look forward to the company's earnings to update our pricing model with a clearer picture in mind.
What do you think? Can Nvidia hold its ground? Let us know in the comment box below or by adding your take using our quant tools. See our complete analysis for Nvidia here. |
