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05/07/24
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Nvidia Stock Lower After Analysts Cut Rating
According to a note on Friday, analysts at New Street Research downgraded Nvidia stock from Buy to Neutral.
The AI chipmaker’s shares dropped less than 1% before the market open.
The independent research firm said that expectations implied GPU revenues would in 2025 increase by 35%, which aligns with their prior forecast. They added that based on what they heard from the value chain, they believe there was limited further upside.
Analysts wrote they downgraded the stock to Neutral as upside would only materialize in a bull scenario, in which the outlook after 2025 would increase substantially, and they did not yet have the conviction on that scenario playing out.
New Street Research said the consensus currently projected revenue growth would slow to the mid-teens, a rate that may be at risk due to increasing competition from AMD and ASICs and the potential slowdown in hyperscale capital expenditures.
Analysts said that if the outlook stayed the same, they did not expect further upside in the stock. They also warned of a potential risk of derating, as the stock trades at 40x the next 12 months’ earnings per share currently, compared to a low of 20x in 2019 when growth slowed to 10%, before it recovered to 35x.
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