Nvidia (NASDAQ:NVDA) pre-announced its Q2 financials that were significantly lower than its previous guidance. Despite the noteworthy reduction in sales and margins, the NVDA stock forecast on TipRanks shows that Wall Street continues to be optimistic about its prospects, given its AI and data center leadership and attractive valuation.
NVDA Stock: The Worst Is Over!
NVDA announced preliminary Q2 revenue of $6.70 billion compared to its guidance of $8.10 billion. The significant cut reflects lower sell-in of gaming products due to macro headwinds. NVDA’s CEO, Jensen Huang, said, “Our gaming product sell-through projections declined significantly as the quarter progressed.”
While data center revenue improved sequentially and year-over-year, it came somewhat lower than NVDA’s projection due to the supply chain disruptions.
Along with sales, NVDA announced a preliminary adjusted gross margin of 46.1%, drastically lower than its outlook of 67.1%.
While the shortfall in revenue and margins from the previous outlook is worrying, analysts believe that bad news is already out. Further, the momentum in the data center and NVDA’s AI (Artificial intelligence) capabilities could continue to support its growth.
In response to NVDA’s weak preliminary Q2 announcement, Needham analyst Rajvindra Gill stated that “the street may be buying into the “kitchen sink” narrative,” which implies revealing all the bad news in one go. Gill lowered his near-term estimates but kept his FY24 estimates unchanged. Also, he retained his Buy recommendation on NVDA stock.
NVDA’s strong balance sheet, attractive valuation, and AI and data center leadership support Gill’s bullish outlook.
What is the Prediction for Nvidia Stock?
Wall Street analysts are bullish about NVDA stock. It has received 25 Buy and seven Hold recommendations for a Strong Buy rating consensus. Moreover, analysts’ average price target of $235.39 implies 28.4% upside potential.
While analysts are bullish, hedge funds and insiders have been selling NVDA stock. Hedge funds sold 575.9K NVDA stock in the last quarter. Meanwhile, insiders sold NVDA stock worth $87.9M. Overall, it has a Neutral Smart Score of 4 out of 10 on TipRanks.
Bottom Line: Near-term headwinds to Play Spoilsport
NVDA’s long-term fundamentals remain intact. However, near-term weakness in gaming revenues, lower average selling prices, and uncertainty over margins could continue to pose challenges for NVDA stock.
