Analysts say Nvidia's weak results, disappointing guidance show signs of a bottom

Published Thu, Aug 25 20226:18 AM EDTUpdated Thu, Aug 25 20226:19 AM EDT

Analysts continue to bet on Nvidia despite a disappointing quarter, with some believing that its weak forward guidance shows signs of a potential bottom for the beaten-up chip stock. Nvidia reported quarterly results on Wednesday that missed expectations on the top and bottom lines. The company also shared current-quarter estimates that also disappointed, as it grapples with a challenging gaming market and macro conditions. The miss from Nvidia came as no surprise for many after the company released disappointing preliminary results earlier this month that led shares to tumble. Despite the findings, Piper Sandler maintained its overweight rating on the stock, noting that a revenue bottom should come in the October quarter as the company launches a slew of new products that could boost revenues ahead. "We truly believe NVIDIA's data center business should normalize shortly, while gaming growth should start next year," wrote analyst Harsh Kumar in a note to clients. "These trends, along with the AI and Omniverse momentum, keep us optimistic about the future." Timothy Arcuri of UBS echoed Kumar's sentiment, noting that the correction in the gaming industry is "largely in the rear-view mirror." He believes that strong demand opportunities remain for its data center business with a slew of "untapped demand pools." "While there is no debating that NVDA's F3Q23 guide is meaningfully worse than expected, we counterintuitively believe this could prove to be the positive reset / flush investors have been waiting (hoping) for," said Wells Fargo's Aaron Rakers. To be sure, not everyone believes Nvidia is in the clear just yet. "Overall, we are surprised by the magnitude and duration of the correction in Gaming (deeper/longer than the correction in 2019), but believe the more significant concern for investors to be the potential cracks in its Data Center business," wrote Deutsche Bank's Ross Seymore. The analyst maintained his hold rating on the stock but lowered his price target to $165 from $175 a share, representing a 4% downside from Wednesday's close. Cowen's Matthew Ramsay believes that shares could remain range-bound in the near term as doubts linger regarding the company's datacenter business in the not too distant future. As of Wednesday's close, shares of Nvidia have plummeted more than 41% since the start of the year and sit more than 50% off their 52-week high. Shares of the chipmaker slipped 4% in the premarket on Thursday. — CNBC's Michael Bloom contributed reporting

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