Record profit and revenue from holiday quarter, margins that other chip makers can only dream of and booming data-center business are apparently not enough for Wall Street
Nvidia Corp. shares finished down Thursday for their worst day in a year even as analysts praised the chip maker’s stellar results for the holiday quarter and widely expect the company’s data-center business to surpass gaming in sales.
Nvidia NVDA, -7.56% reported double the profit it had from a year ago, broke new sales records, and provided a strong outlook amid supply-chain concerns on Wednesday. In response, Bernstein analyst Stacy Rasgon titled his note “What more can you ask for?”
“Once again Nvidia gives investors what they are presumably asking for, namely strong secular growth and a continued reason to dream,” said Rasgon, who has an outperform rating and a $360 price target. “The company continues to benefit from two of their strongest product cycles in their history simultaneously as both their core gaming and datacenter segments overdeliver.”
Yet investors appeared to be asking for more, as shares dropped nearly 9% in Thursday trading, and finished down 7.5% at $245.19, their worst one-day drop since Feb. 25, 2021, when they fell 8.2% after some on Wall Street nitpicked about data-center results amid then-record holiday-quarter sales.
Analysts seemed to be more impressed, with at least six raising their price targets while only one lowered a target. Susquehanna Financial analyst Christopher Rolland said late Wednesday he was confused by the “muted after-hours reaction” of the stock, when it was down a mere 2%.
Rolland, who has a positive rating and a $360 price target, said perhaps investors were being “perhaps driven by less GM expansion and elevated opex,” but also remarked he thought the stock was already trading low compared with the sector.
Beyond record profit and revenue, Nvidia reported adjusted gross margins of 67% and expects those to hold in the current quarter, while operating expenses were 22% higher than a year ago at $1.45 billion for the fourth quarter.
Those 67% margins, compared with Intel Corp.’s INTC, -1.37% and Advanced Micro Devices Inc.’s AMD, -4.52% margins in the low 50s, are the result of Nvidia’s large footprint in software, Colette Kress, Nvidia’s chief financial officer, told MarketWatch in an interview Wednesday evening. More than once during a conference call with analysts, Nvidia Chief Executive Jensen Huang stressed that the company is a “software-driven” business with such properties as Omniverse and its AI-enabled auto software.
Jefferies analyst Mark Lipacis, who has a buy rating and a $370 price target, said in a note that it’s this ecosystem that drives Nvidia’s moat.