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Nvidia has said that Covid-19 lockdowns in China, plus the suspension of sales in Russia, will reduce its second-quarter revenue by $500 million.
Justin Sullivan/Getty Images
Shares of
Nvidia
were falling on Monday after
Piper Sandler
cut its target for the stock price, citing concern over sales in important markets such as the U.S., China, and Russia.
Analyst Harsh Kumar lowered his target for
Nvidia
(ticker: NVDA) to $235 from $250 in a research note on Monday, but maintained an Overweight rating on the stock.
“We revise our estimates downward for NVDA based on continued issues in China and Russia, gaming laptop weakness, consumer pressure, and our concerns on crypto,” he wrote.
The company halted sales in Russia following Moscow’s invasion of Ukraine, while continued broad lockdowns to fight Covid-19 in China have disrupted a broad range of industries there. The company is expecting those factors to reduce second-quarter revenue by up to $500 million.
Kumar expects management to issue a similar outlook for the third quarter when the company reports earnings in August. He also noted that prices for gaming laptops in the U.S. have been trending downward in the past few months, suggesting weakness in consumer spending as people scale back on big-ticket items in response to rising interest rates.
The recent decline in cryptocurrency prices has also had a negative impact on Nvidia’s gaming sector, given that its graphics cards have long been a popular option for miners. “We suspect that there is a strong likelihood that with the meltdown in crypto, some of the industrial miners could sell some of their excess capacity into the secondhand marketplace for GPUs, which may also hinder sales,” he wrote.
That said, investors may already be factoring in some softness during the second quarter, he added. Analysts have been warning about a gaming slowdown for months, and the stock has shifted accordingly. Nvidia shares are down 46% so far this year, and were down 4% on Monday, trading at $152.14.
The stock took a hit in the first week of July, after competitor
MU
) attributed a weaker-than-expected outlook to falling consumer demand in China. The silver lining for Micron is its data-center business, which continued to see strong demand, the company said.
Nvidia may be in a similar situation, Kumar wrote. Much of its data center segment appears to be on “solid footing,” he said.
Write to Sabrina Escobar at sabrina.escobar@barrons.com
