Susquehanna analyst Christopher Rolland recently reiterated a Positive rating on Nvidia Corp with a price target of $850, up from $625.
Rolland expects the company to achieve a +$1.58 beat on the fourth quarter and estimated fiscal 2025 revenue of $99 billion. The chip designer is scheduled to report earnings on February 21.
The analyst anticipates improved results and guidance, highlighting solid checks around Data Center GPUs.
In the Data Center segment, where revenue now exceeds 80%, demand for AI remains robust, bolstered by optimistic hyper-scale capex guidance and recent remarks from Meta Platforms Inc and Tesla Inc indicating ongoing vital GPU purchases.
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Addressing concerns about a potential air pocket ahead of B100, Rolland deemed it increasingly less likely, although acknowledging the possibility of decelerating growth in the third quarter leading up to the year-end ramp.
He observed that H100s have predominantly been allocated to Nvidia’s largest customers, while the long-tail list is yet to receive substantial supply, instilling confidence in first-quarter guidance.
Rolland acknowledged that supply remains somewhat restrictive but opined that it is decreasing, supported by the +53% sequential increase in purchase obligations last quarter and CFO Kress’s unwavering assurance of incremental supply throughout the year.
The shift in product mix away from A100s is now less of a revenue and growth driver, given Rolland’s estimation of A100 mix declining from -8% of total Data Center cards in the fourth quarter to just -5% in the first quarter, as Nvidia aggressively pivots towards H100, which brings almost a 2x benefit in average selling price.
Nonetheless, a product mix shift may yield benefits in the second quarter as Nvidia ramps the H200 and once again in the fourth quarter during the long-anticipated B100 launch.
Rolland anticipates Gaming performance to be in line with or slightly better than expectations, citing positive read-throughs from Advanced Micro Devices, Inc Radeon GPU cards and data from PC-SIGnals suggesting modest Nvidia GPU share gains. Concurrently, Steam data indicates ongoing adoption of the 40-series.
For Pro Viz, Rolland foresees sustained high demand for Omniverse AI workstation offerings.
However, the outlook for the Auto segment is more somber, as Nvidia previously pointed out weaker Chinese EV demand likely to persist, alongside a global slowdown in EV demand, as highlighted by the analyst.
The analyst expects continued gross margin strength driven by Nvidia’s robust pricing power, but does not envisage significant upside from the current level of over 75%.
In summary, Rolland anticipates another robust earnings report but believes that investors have largely factored in the near-term upside, with the extent of the beat being the real point of contention.
Rolland’s current revenue projections are $21.5 billion in the fourth quarter, $23 billion in the first quarter, and $99 billion for fiscal 2025, aligning closely with what is colloquially referred to as the “whisper number.”
He still perceives Nvidia as harboring one of the most profound opportunities in the market, at a reasonable valuation.
Price Actions: NVDA shares traded higher by 1.48% at $731.98 on the last check Wednesday.
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