Nvidia's Stock Price Target Is Cut After AMD's Weak Earnings -- Barrons.com
DOW JONES & COMPANY, INC. 3:31 PM ET 10/25/2018
Symbol Last Price Change | NVDA | 207.84 | +8.43 (+4.23%) | | QUOTES AS OF 04:00:00 PM ET 10/25/2018 |
Bank of America Merrill Lynch is less optimistic about Nvidia(NVDA) stock upside after AMD reported weakness in its graphics business.
The firm's analyst Vivek Arya lowered his price target to $300 from $360 for Nvidia(NVDA) shares, citing AMD's disappointing sales and outlook.
"AMD attributed weaker results to softer graphics card (GPU) channel sell-through...which will take a few quarters to work through," Arya wrote on Thursday. "Importantly we view this is a negative read across for NVDA's 2H18 PC gaming business."
AMD is Nvidia's(NVDA) biggest competitor in the graphics chip business for PC gaming and data-center applications.
On Wednesday, AMD said its Computing and Graphics segment underperformed their expectations by $100 million in the third quarter, which was "entirely" driven by the graphics business. The company added that inventory levels for AMD's graphics products remain elevated in the retail channel.
Despite the downshift in his expectations, Arya reiterated his buy rating for Nvidia's(NVDA) stock due to its exposure to important technology growth trends.
We "view current risk-reward profile as especially attractive. NVDA remains the most unique investment in semis and technology given its exposure to multiple 10x secular growth markets in artificial intelligence (AI), gaming, and autonomous cars," he wrote.
Nvidia's (NVDA) stock is down significantly this month. Its shares are down more than 25% month to date, while the iShares PHLX Semiconductor ETF (SOXX), which tracks a widely followed chip index, has fallen about 14%. Investors have been increasingly worried about the chip sector's fundamentals in recent weeks.
The stock bounced back 5% on Thursday after dropping 10% the previous trading session amid a big technology selloff.
Nvidia (NVDA) is slated to report its results for the fiscal third quarter on Nov. 15.
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