NVIDIA Trading Lower Despite Strong Quarter

NVIDIA Inc. (NVDA) is trading lower by more than 3% in Thursday’s pre-market despite beating Q4 2020 earnings estimates by a wide margin. The company posted a profit of $3.10 per-share during the quarter, $1.12 better than expectations, while revenue surged a healthy 61.1% year-over-year to $5.0 billion, $180 million higher than consensus. Q1 2021 revenue guidance was raised during the presentation, from $4.53 billion to a range between $5.19 and $5.4 billion.

Record Revenues

Q4 Data Center revenue posted a new record at $4.19 billion, up 97% compared the same quarter last year. $6.70 billion full-year revenue for the division posted a record as well, up 125%. Q4 Gaming revenue grew 10% compared to the prior quarter and 67% year-over-year, posting records of $2.50 billion for the quarter and $4.76 billion full-year.  Automotive results were less spectacular, with full-year revenue down 23% to $536 million.

Cowen analyst Matthew Ramsay raised his target to $665 after the report, noting “NVIDIA printed a strong beat/raise despite supply constraints. Valuation warrants scrutiny, but being underwhelmed that gaming is the larger relative source of AprilQ upside is a nitpick in our view. We note DC guidance still materially beat consensus. NVIDIA remains the industry’s best open-ended AI-driven growth story. Visibility to auto revenue growth is next catalyst. Outperform; PT to $665.”

Wall Street and Technical Outlook

Wall Street consensus hasn’t changed much in the last three months, with an ‘Overweight’ rating based upon 25 ‘Buy’, 5 ‘Overweight’, 7 ‘Hold’, 1 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $370 to a Street-high $700 while the stock is set to open Thursday’s session more than $50 below the median $613 target. Clearly, there’s a major disconnect between analysts’ enthusiastic targets and investor perceptions of value.

The stock broke out above the 2018 high at 292.76 in May 2020, and entered a momentum-fueled advance, underpinned by management missteps at Intel Corp. (INTC). The uptick topped out at 589.07 in September, giving way to a triangular trading range that yielded a breakout and all-time high at 614.90 on Feb. 16. It bounced after a pullback to triangle support ahead of the news, setting the weekly low at 535.58 as the bullish line-in-the-sand.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.