Nvidia’s rosy forecast prompts higher price targets from analysts
Chip giant Nvidia’s latest revenue guidance topped Wall Street expectations, but its proposed Arm deal may have hit a snag.
- NVIDIA Corp (All Sessions) (Nasdaq: NVDA) share price reaches US$191.05 per share
- It estimated that its third-quarter revenue could amount to US$6.8 billion
- Talks over Nvidia’s potential purchase of a UK firm are taking longer than expected
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Nvidia stock price inches up
Shares of the world’s largest maker of artificial-intelligence chips for data centres and graphics chips for gamers rose 0.3% to trade at US$191.05 as of 21:35 SGT on Thursday.
California-based Nvidia’s latest results and guidance, announced on Wednesday, came in better than analysts anticipated.
However, its bid to buy British semiconductor technology firm Arm Ltd may face challenges. Investors are focusing on whether the proposed US$40 billion acquisition will withstand regulatory scrutiny and be completed by March 2022 as Nvidia had promised, Reuters reported.
About 34 analysts gave ‘buy’ or ‘overweight’ ratings on NVDA shares, five suggested ‘hold’, while two recommended ‘sell’ or ‘underweight’ as of Thursday morning, Wall Street Journal data showed. Their average target price was US$214.28.
Numerous analysts including JPMorgan, Credit Suisse, Cowen and Company, and Piper Sandler increased their target prices this week on Nvidia.
Why is Nvidia upbeat on the current quarter?
Amid red-hot demand, Nvidia’s revenue forecast for its third quarter has exceeded research teams’ expectations.
It estimated that third-quarter revenue could come in at around US$6.8 billion, plus or minus 2%. That beat analysts’ expectations of US$6.54 billion on average, according to Bloomberg data.
Revenue for its second quarter soared 68% to US$6.51 billion, similarly surpassing analysts’ predictions of US$6.33 billion, based on Refinitiv data.
Meanwhile, second-quarter adjusted profit was US$1.04 per share, above analyst estimates of US$1.01 per share.
Nvidia CEO Jensen Huang flagged that chip demand could outstrip supply ‘for some time’, although ‘the good news is we’ve secured enough supply to meet our growth targets’.
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* Based on revenue excluding FX (published half yearly financial statements, June 2020).
US$40 billion Arm acquisition: Will it go through?
On Wednesday, Nvidia disclosed that talks with regulators to clear its planned purchase of Arm were taking longer than expected, and some Arm licensees had expressed concerns or objected.
However, Colette Kress, Nvidia’s chief financial officer, said the company remained confident the deal would close. She added that ‘regulators should recognise the benefits of the acquisition to Arm, its licensees, and the industry’.
Nvidia last year agreed to acquire the British firm from Japan’s SoftBank Group. Purchasing Arm will give Nvidia access to chip designs used by the world’s largest technology companies.
US financial services firm Edward Jones’ analysts noted: ‘Many investors already place a low probability on the deal ultimately being approved. If it is blocked, I think it will be met with a collective shrug.’
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