Shares of chip maker Nvidia (NVDA) are regaining loss ground, currently down 37 cents, or 2%, at $15.80, but up from a low of $15, this morning after the company last night offered a better-than-expected fiscal Q4 report but forecast Q1′s revenue below consensus, and said it was withdrawing a bullish outlook for 2013 that it offered last fall.
The stock got one downgrade this morning, that I can see, from Caris & Co.’s Rob Cihra, who cut his rating on the stock from Average to Below Average, while cutting his price target to $15 from $13, writing that the Q1 outlook sets up the year as “back-end loaded.”
Cihra focuses in on the problems the company had getting adequate yield of chips in the 28-nanometer process its fab partner is running:
Despite a 50%+ qq rise in Tegra sales the outlook slides 4.0% qq. Culprits are insufficient 28nm chips (yield issues) and HDD constraints in GPU’s which more than offset notebook share gain (AAPL, and HPQ underpenetrated in our analysis). The yield issue really means a 270 bps apples/ apples GM drop to 49.2%, a 150 bps miss to our model. As we feared given the multi-pronged TAM expansion push, opex rises 4% qq or 10% above our prior forecast to press operating margins 1,300 bps below target at 7.7%.
Cihra cut his estimate for the fiscal year to $4.07 billion in revenue and 61 cents a share from a prior $4.2 billion and 93 cents.
The bulls and bears are broadly divided over this one, with deep concerns about yield issues jousting with what bulls believe are expectations so low that the company will come out the winner in the end:
Betsy Van Hees, Wedbush Securities: Reiterates an Outperform rating and an $18 price target. The outlook for Q1 was “far better than PC supply chain peers that are being impacted by seasonality and the hard disk drive shortage from Thailand floods.” She thinks the 28-nanometer yield issue is “a minor speed bump.” She advises buying on weaknesses to take advantage of the fact that “in calendar 2012, NVIDIA will benefit from (1) the recovery of HDD industry, (2) improving PC demand, (3) Tegra uptake in smartphones, and (4) a return to operating leverage in the model from improving GM as TSMC quickly resolves the lower 28nm yields that are impacting the overall industry.” Van Hees raised her 2013 revenue estimate from $3.95 billion to $4.03 billion, but cut her EPS estimate from 74 cents to 64 cents.
Rajvindra Gill, Needham & Co.: Reiterates a Buy rating, adn raises his price target to $20 from $17. expectations for Tegra in 2012 We were encouraged by these two actions as we are approaching a bottom in terms of revenues/earnings (we think C2Q) & establishing a more realistic forecast for Tegra. These two areas could have been a potential overhang on the shares as we progressed throughout the year. We remain confident that Tegra will be adopted broadly in the smartphone market, particularly in China, and we believe the Tegra 3 is well-positioned for Windows 8 on ARM.” Gill cut his 2013 estimate to $4.1 billion and 95 cents from a prior $4.16 billion and $1.10.
Chris Caso, Susquehanna Financial Group: Reiterates a “Positive” rating and an $18 price target. “we get the sense the company is trying to set beatable goals over the next several quarters. A near-term margin issue due to 28nm yields was a negative surprise, and the company guided April revenue more cautious than the Street due to lingering effects from the HDD shortages. In addition, NVDA took its preposterously aggressive FY13 guidance off the table (the Street was way ahead of them), and guided Tegra to grow 50% Y/Y (which was directly in line with our expectations).” Caso cut this year’s outlook to $4.17 billion in revenue from a prior $4.18 billion, and cut his EPS estimate to 74 cents from 93 cents.
Vijay Rakesh, Sterne Agee: Reiterates a Neutral rating on the stock, and removes his price target on the stock. “While Tegra3 is ramping well, it is only 10% of revenues, and yield issues on the core PC-GPU (~60% of revs) could hurt top line and leverage. We would stay on the sidelines as yield issues could further hurt market share, GPU ramps and dampens any tailwind from PC-HDD supply chain improvements. We also note AMD is ramping 28nm Radeon7970 with GPU share gains.” Rakesh cut his 2013 outlook from $3.9 billion and 96 cents to $3.9 billion and 74 cents.
Nasdaq quotes delayed at least 15 minutes, all others at least 20 minutes.
Markets are closed on certain holidays. Stock Market Holiday List
By accessing this page, you agree to the following
Press Release Service provided by PRConnect.
Stock quotes supplied by Telekurs USA
Postage Rates Bots go here