On Thursday, Piper Sandler reaffirmed its confidence in NVIDIA Corporation (NASDAQ:NVDA) stock, sustaining an Overweight rating and a $140.00 price target on the shares.
The firm's stance comes after NVIDIA's stock declined in after-hours trading due to concerns over gross margin (GM) compression and guidance that did not surpass previous expectations significantly.
The analyst from Piper Sandler addressed these concerns, stating that NVIDIA's fundamentals are still solid. They noted that the recent dip in stock price presents a buying opportunity.
The analyst pointed out that NVIDIA's anticipated revenue increase in the fourth quarter, attributing it to the introduction of the Blackwell product, which is expected to generate several billion dollars in revenue despite a slight delay in its rollout.
NVIDIA's Blackwell, which is sampling in the third fiscal quarter, faced minor setbacks due to yield and manufacturing issues, slightly impacting revenue guidance.
However, the analyst expects that the company's GM should stabilize back to mid-70s percentages within two to three quarters. This expectation is based on the company's current focus on speed and volume of output for Blackwell, rather than a finely tuned supply chain.
The reiteration of the Overweight rating by Piper Sandler underscores their belief in NVIDIA's potential for growth and recovery in the coming quarters.
The firm encourages investors to view the recent decline in NVIDIA's stock as an opportunity to invest, anticipating a rebound in gross margins and a significant revenue boost with the full launch of Blackwell.
In other recent news, NVIDIA Corporation has been the focus of several significant developments. Bernstein, a research firm, recently upgraded the company's shares to a price target of $155, citing NVIDIA's robust performance and promising future prospects, particularly in the datacenter sector.
The firm also highlighted the expected contribution of several billion dollars of incremental Blackwell revenue in the fourth fiscal quarter to further sequential growth.
NVIDIA's customer base is diversifying, with noted improvements in its networking segment. The firm's software revenue is projected to reach a $2 billion run-rate by the end of the year. However, despite surpassing profit, revenue, and outlook expectations, NVIDIA's shares fell by 7%, reflecting investor caution.
NVIDIA has been experiencing a surge in demand for its AI chips, particularly from nations investing in AI models tailored to their own languages.
Despite this, Nvidia's third-quarter revenue forecast fell short of investor expectations, forecasting about $32.5 billion in total revenue for the quarter ending in October.
InvestingPro Insights
Recent data from InvestingPro underscores NVIDIA Corporation's (NASDAQ:NVDA) robust market positioning and growth prospects. NVIDIA boasts a perfect Piotroski Score of 9, indicating high financial health, and analysts are anticipating sales growth in the current year. This aligns with Piper Sandler's positive outlook on the company's revenue prospects, particularly with the upcoming Blackwell product.
InvestingPro data also highlights NVIDIA's impressive revenue growth, with a 208.27% increase over the last twelve months as of Q1 2023. The company's gross profit margin stands at a strong 75.29%, reinforcing the analyst's confidence in NVIDIA's fundamentals. Despite trading at a high earnings multiple with a P/E ratio of 72.84, NVIDIA's role as a prominent player in the Semiconductors & Semiconductor Equipment industry, coupled with a high return over the last year, suggests that the stock's current valuation reflects its growth trajectory and market expectations.
For investors seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/NVDA, including insights on NVIDIA's volatility, cash flow sustainability, and debt management. These tips can provide valuable context for assessing NVIDIA's investment potential in light of the current market dynamics.
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