Nvidia is a buy even with weaker guidance from China lockdowns, Wall Street says

Published Thu, May 26 202210:36 AM EDTUpdated Thu, May 26 202210:46 AM EDT

A succession of analysts reiterated buy ratings but trimmed price targets on Nvidia after the semiconductor company issued lighter guidance than expected after a strong quarter. Shares of Nvidia initially dropped in extended trading after the company said on Wednesday that it expects sanctions in Russia and ongoing Covid lockdowns in China will result in a $500 million hit in the current quarter. The semiconductor company still posted beats on the top and bottom lines on strength in its gaming and data center businesses. Nvidia's shares have since pulled back on losses and turned positive Thursday morning. Analysts issued a flurry of reports after Nvidia posted its results, with many of them highlighting momentum in the company's data center business. Shares of the chip company are down about 42% year to date. "Data Center remains the star of this show and we expect that end market to continue to grow throughout the year," wrote Barclays analyst Blayne Curtis in a Thursday note. Analysts cut price targets across the board, with Needham's Rajvindra Gill slashing as much as 40% on the lowered outlook. Many said the lower guidance is warranted because of structurally weaker gaming demand. While analysts expect consumer demand will recover somewhat this year after lockdowns in China lift, they believe it will pull back further next year. Analysts at Morgan Stanley are modeling for a gaming correction of about 16% in calendar year 2023. "We believe many investors have been wanting to own the NVDA datacenter story especially after recent stock declines, but have been hesitant to step in front of potentially negative gaming dynamics," Bernstein analyst Stacy A. Rasgon wrote in a Thursday note. "Viewed in that light those investors got at least some of what they wanted with a decently-sized gaming cut embedded in guidance combined with a continued strong datacenter narrative..." Rasgon said. Two analysts posted neutral ratings on the stock, with one saying that it was "too early" to get back in despite a "very bright long-term outlook." Here are the ratings and price targets: Jefferies: Buy, PT $370 Barclays: Overweight, PT $295 JPMorgan: Overweight, PT to $285 from $350 Citi: Buy, PT to $315 from $350 Morgan Stanley: Equal-weight, PT to $182 from $217 Rosenblatt Securities: Buy, PT $400 Susquehanna Financial Group: Positive, PT to $260 from $280 Bernstein: Outperform, PT $225 Benchmark: Buy, PT to $228 from $365 Needham: Buy, PT to $240 from $400 Baird: Neutral, PT to $165 from $225 Bank of America: Buy, PT to $270 from $320 UBS: Buy, PT $280 Wells Fargo: Overweight, PT $250 Atlantic Equities: Overweight, PT to $205 from $370 Raymond James: Strong Buy, PT to $250 from $365 —CNBC's Michael Bloom contributed to this report.