New York (NY) - Despite Nvidia’s admission of faulty notebook chips and the subsequent stock plunge, several semiconductor analysts are maintaining ’BUY’ ratings on the stock.
Big shots at JPMorgan and Thompson Financial showed traditional conservatism on this negative news, but analyst firms like Wedbush Morgan and Oppenheimer & Co. did exactly the opposite. In essence, the analysts believe the chip/chipset problems are easily surmountable near-term issues.
Michael Lucarelli from Wedbush Morgan Securities maintained a BUY rating for NVDA stock. In a research note sent to clients, Michael stated that "Nvidia clearly made a poor design decision in the not too distant past, in our opinion, which ultimately led in a price/performance gap large enough to warrant significant price cuts ultimately resulting in the pre-announcement."
Lucarelli did not spare leadership of Nvidia, claiming that they’ve clearly failed to execute on the chipset side, but a lot is expected from Tesla and Tegra product line-ups : "Management’s recent missteps lead us to have increased concerns about execution and we are taking a more cautious view on the company. However, we believe risk-reward looks attractive given limited downside and the potential to right the ship several quarters out, particularly with Tesla/Tegra growth on the come."
When it comes to target prices, Wedbush expects that stock will be back at $18, with the new revenue estimate of $4.4 billion : "Given the unbalanced nature of Nvidia’s model today, we think that price to sales is a more accurate way of valuing shares. As such, we arrive at an $18 12-month price target by applying the 5-year price to sales average for Nvidia of about 2.5x to our new FY10 revenue estimate of $4.4bn."
Rick Schafer from Oppenheimer & Co. changed his rating to "Outperform," setting identical price target - $18. In a note sent to his clients, Rick stated that "Nvidia’s issues are well understood and near-term, and we would use expected weakness today as an opportunity to build positions in a still solid long-term story".
At the time of writing (10:12AM PST, 1:12PM EST), NVDA stock is floating between 12.45 and 12.61, down 30.7% since yesterday. Market capitalization dipped to around seven billion USD, which is first sub-10B market cap Nvidia had for a very, very long time. Three billion USD were erased between 5PM EST yesterday and 9AM EST today.