Typically, many Wall Street analysts are the kings and queens of after-the-fact calls. Often, but not always, they continue to pound the table on a company even when the fundamentals are weakening. Then when they miss numbers, lower guidance or both, they will often cut the rating and lower the price target.
Over the years, we here at 24/7 Wall St. have pointed out analysts that have gone that route, so it’s only fair to point out when they make an outstanding call. Nvidia Inc. (NASDAQ: NVDA) was blitzed on Monday when the company came out and lowered guidance, citing among other things deterioration in the economy in China. The company reports earnings on February 14 and now expects quarterly revenue of $2.20 billion, down from previously stated guidance of $2.70 billion.
Jefferies semiconductor analyst Mark Lipacis, was bullish early on the stock as it exploded higher for years, and he made a big call last week, before the hemorrhaging, by removing the company from the firm’s Franchise List picks of top stocks to Buy. While he maintains a Buy rating on the shares, with a $246 price target, he saw the proverbial writing on the wall and noted this in the January 25th research report:
We maintain a Buy rating on NVIDIA, but remove it from Jefferies Franchise Picks as we expect cloud players to digest Data Center capacity over the next several quarters. We continue to view the company as a key beneficiary of secular computing trends outlined in our “4th Tectonic Shift” investment thesis. Over the next 5 years, we think the aggregate data center processor market will expand to $50 billion and the parallel processing part of that market will approach $20 billion, and we expect the company to capture a large part of that parallel processing market.
This is how a good analyst operates. He maintains the long-term positive conviction in the stock while noting short-term potential bumps and issues in the story.
We screened the Jefferies semiconductor research for stocks rated Buy and found four that look like solid plays for aggressive accounts with a longer time horizon.
After years of frustrating performance, this top company appeared to have turned the corner, but it was absolutely destroyed in October and November. Advanced Micro Devices Inc. (NYSE: AMD) is one of the largest suppliers of PC microprocessors and graphics processors worldwide to computing original equipment manufacturers. The company’s main product lines include desktop, notebook and graphics processors, and embedded/semi-custom chips.
Last year the company released its first major offering in five years, the Ryzen chipset, which many feel is uniquely positioned to compete with the big players like Intel and Nvidia in the $50 billion total addressable market for personal computers, gaming, artificial intelligence and servers.
While third-quarter earnings were somewhat disappointing, new catalysts could drive the shares, with AMD having a generational share gain opportunity. EPYC 2/Rome can leverage the software and qualification work started with EPYC 1, and most expect Rome to ramp in the second half of 2019. The new Vega GPU will be industry’s first at nanometers, and AMD is already annualizing more than $100 million in data center GPU sales, addressing a $10 billion potential opportunity.
The Jefferies price target for the shares is $30, which compares with a much lower Wall Street consensus target of $23.70. The shares closed Monday’s trading at $20.18, down almost 8% on the day.
This stock could very well continue to benefit from an increase in information technology and upcoming 5G spending. Analog Devices Inc. (NASDAQ: ADI) is a leader in the design, manufacture and marketing of analog, mixed-signal and digital signal processing integrated circuits for use in industrial, automotive, consumer and communication markets worldwide. It offers signal processing products that convert, condition and process real-world phenomena, such as temperature, pressure, sound, light, speed and motion, into electrical signals.