Shares of Nvidia (NVDA) were down in the after-hours session after the company reported earnings for its second quarter of Fiscal Year 2023. Adjusted earnings per share came in at $0.51, which beat analysts’ consensus estimate of $0.50 per NVDA share. In the past nine quarters, the company has beaten estimates nine times.
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In addition, sales increased 3% year-over-year, with revenue hitting $6.7 billion compared to $6.5 billion. However, the quarter-over-quarter comparison equates to a 19% decline. This wasn’t much of a surprise today, as Nvidia had already warned that it would significantly miss its original guidance of $8.1 billion.
The fall in revenue was primarily due to its Gaming segment, which fell 33% year-over-year and 44% quarter-over-quarter. To make matters worse, the gross margin contracted from 64.8% to 43.5%, demonstrating significant operating deleverage. Therefore, the company’s operating income decreased from $2.4 billion in the comparable period to $499 million now.
However, guidance for Q3 did not impress, as revenue is expected to come in at $5.9 billion versus the expected $6.9 billion. The expected decline can once again be attributed to a slowdown in gaming.
Investor Sentiment for NVDA Stock is Currently Negative
The sentiment among TipRanks investors is currently negative. Out of the 557,672 portfolios tracked by TipRanks, 11.8% hold NVDA stock. In addition, the average portfolio weighting allocated towards NVDA among those who do have a position is 7.92%. This suggests that investors of the company are very confident about its future.
However, in the last 30 days, 0.3% of those holding the stock decreased their positions. As a result, the stock’s sentiment is below the sector average, as demonstrated in the following image:
What is a Good Price for NVDA Stock?
Nvidia has a Strong Buy consensus rating based on 24 Buys, seven Holds, and zero Sells assigned in the past three months. The average NVDA stock price target of $237.48 implies 38.1% upside potential.
Takeaway – Despite Current Headwinds, NVDA Stock Has a Bright Future
Nvidia saw a weak quarter, as revenue decreased substantially on a quarter-over-quarter basis, while Q3 guidance came in lower than expected. Although the contracting margins and declining sales are not what investors want to see, the company still has a bright future ahead as it continues to invest in very strong secular growth trends. Thus, investors who are believers in the stock shouldn’t be too worried about short-term headwinds.
