Wall Street says Nvidia’s post-earnings drop is an “invitation” to buy

• Shares of Nvidia fell 5% despite a strong second quarter, which Wall Street sees as a buying opportunity.

• Third-quarter revenue forecasts of $32.5 billion topped average estimates but missed higher forecasts.

• Analysts highlight the long-term potential of Nvidia’s AI chips and demand for Hopper and Blackwell chips.

Thursday’s drop in Nvidia’s share price represents a buying opportunity for investors, according to a chorus of Wall Street analysts and portfolio managers.

Shares of Nvidia fell as much as 5% after it reported strong second-quarter earnings results, signaling that investors’ expectations were too high.

Third-quarter revenue forecasts were $32.5 billion, which beat the average analyst estimate of $31.9 billion, but well below some skyrocketing forecasts of nearly $38 billion.

Still, analysts said Nvidia’s results reinforced the idea that the company still has a long way to go to deliver hundreds of billions of dollars worth of graphics processing units over the next few years.

Here’s what Wall Street is saying about Nvidia’s earnings results.

Bank of America: Ignore the Quarterly Noise

Bank of America analyst Vivek Arya reiterated his “buy” rating on Nvidia, called it “a top pick in the sector” and raised his price target to $165 from $150, representing a 36% advantage.

While Arya acknowledged that Nvidia’s several-month delay of its next-generation Blackwell chip could lead to a “good, not great” third quarter, he said its prospects are too great to ignore.

“We continue to believe in NVDA’s unique growth opportunity, execution and dominant share of over 80% as generative AI deployments are still in their first 1-1.5 years of what represents an initial investment cycle of at least 3- 4 years,” Arya said.

He added: “Importantly, next generation AI models will require 10x-20x more computing power to train (Blackwell only 3x-4x more computing than Hopper).”

And that should mean demand for Nvidia’s chips won’t drop when it introduces its next-generation GPU chip, Rubin, which is expected to launch in 2026.

Ultimately, Arya said Nvidia offered investors a “compelling valuation” at a price-to-earnings ratio of 30 to 35 times, based on estimates for 2025, with earnings per share expected to grow 40 percent.

JPMorgan: Blackwell chip delay won’t affect 2025 earnings

JPMorgan said the expected two-month delay in the launch of Nvidia’s Blackwell chip will not adversely affect the company’s expected revenue profile in 2024 and 2025.

“Demand for Blackwell is very strong and will outpace supply until at least mid-25, in our view,” said Harlan Sur, a JPMorgan analyst.

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Surprisingly strong demand for Nvidia’s previous-generation Hopper chip helps fill the revenue gap left by Blackwell, and has growth potential “given the strong AI demand environment,” Sur said.

“In conclusion, the team continues to maintain 1-2 steps ahead of competitors with its silicon/hardware/software platforms and a strong ecosystem, and the team is further distancing itself with aggressive cadence of new product launches and more segmentation of the products. over time,” added Sur.

JPMorgan reiterated its “overweight” rating and raised its price target to $155 from $115, representing a 27% upside.

Goldman Sachs: Nvidia offers a balanced risk-reward profile

Toshiya Hari, a Goldman Sachs analyst, was encouraged by Nvidia’s expected growth in Blackwell products in the fourth quarter, Hopper’s continued strength and a doubling in revenue from Nvidia’s Networking business.

The analyst said that in the most optimistic scenario, Nvidia shares could rise 89% to $230 per share if the company could deliver a 100% year-over-year growth rate for its data center business next year.

Hari’s most bearish scenario includes a 60% swing in the stock price to $47, based on a 25% year-over-year decline in Nvidia’s data center revenue from major cloud players.

And finally, a 90% upside scenario versus a 60% downside scenario represents an attractive risk-reward profile for investors.

Wall Street Portfolio Managers

Wall Street professionals who manage money for clients see the decline in Nvidia’s stock price as an opportunity to buy more shares.

In emails to Business Insider, here’s what they had to say:

Nancy Tengler, CEO and Chief Investment Officer of Laffer Tengler Investments

“We believe the sale is an opportunity to accumulate equity. This is not the internet bubble. Old economy companies are adopting AI to improve margins and hyperscalers are still growing at about $50M each + about 79% per year. Tengler said.

John Belton, portfolio manager at Gabelli Funds

“This was a solid ‘thesis validation’ quarter. Everything, for the most part, is on track. Earnings expectations are rising. As long-term investors, we won’t be bothered by the idea that beating expectations is somewhat boring. said, the thought of Nvidia getting boring would probably be a healthy thing for stocks and the stock market in general,” Belton said.

James Demmert, chief investment officer of Main Street Research

“Nvidia’s stock pullback is an invitation for investors to buy the stock,” Demmert said. “Especially for investors who missed the even bigger buying opportunity with Nvidia that came out in early August.”

He added: “Nvidia’s strength in the quarter showed that its valuation is justified and that the stock has more room to run.”

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