German DZ Bank Downgrades NVIDIA Stock Price Despite Recent Rally

NVIDIA (NASDAQ: NVDA) stock price bounced sharply from the 52-weeks low that it had hit early this year. The stock price is up 30% since the start of this year.

It is currently trading around $176 a share. The upside momentum is supported by the bullish trend in the broader market.

NVDA NVIDIA Corporation daily Stock Chart

Market analysts are not much optimistic about future fundamentals. German DZ Bank, for instance, downgraded NVIDIA stock price to $158 – with a Sell rating. The company’s recent financial numbers along with an outlook for the following quarters does not offer support to stock price.

It has generated second-quarter revenue of $3.12 billion, down 17% from the previous year period. Its gross margin, operating income, and earnings per share also declined at a high double-digit rate in Q2.

Its operating income declined 38% while earnings per share dipped 36% year over year in the second quarter. On the positive side, the company generated growth on a sequential basis.

We achieved sequential growth across our platforms,” said Jensen Huang, founder, and CEO of NVIDIA. “Real-time ray tracing is the most important graphics innovation in a decade. Adoption has reached a tipping point, with NVIDIA RTX leading the way.

NVIDIA has been aggressively working on acquisitions and investments in organic growth opportunities to support revenue growth. It has recently announced to acquire Mellanox Technologies.

It is also working on artificial intelligence along with conversational AI and autonomous systems like self-driving vehicles and delivery robots.

The company expects to generate third-quarter revenue in the range of $2.9 billion. The analysts’ consensus revenue estimate stands around $2.92 billion. The third-quarter revenue outlook represents a substantial decline from the previous quarter revenue of $3.12 billion.

Despite slower revenue growth, its dividends are safe. It currently offers a quarterly dividend of $0.16 per share. It has suspended share buyback plan amid its strategy of investment in growth opportunities. NVIDIA stock price movement is correlated with market trends and financial performance.

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siraj sarwar

Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.
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