NVDA stock tumbled on Friday after the company’s earnings report disappointed shareholders on Thursday, even though it beat estimates. However, many analysts responded to the disappointment by boosting their price targets for NVIDIA and advised investors to buy the dip.
Apparently, investors took their advice because NVDA stock surged on Monday, peaking at $166.75 for a 7% increase during regular trading hours and closing the window some may have been looking for. After a more than 160% gain over the last 12 months, NVIDIA has become the top-performing stock in the S&P 500, according to data from FactSet.
Buy the dip in NVDA stock
The general consensus among analysts regarding Friday’s tumble was that investors should buy the pullback in NVDA stock, as most reassured investors about the company’s datacenter business. In a note dated Aug. 11, Jefferies analyst Mark Lipacis advised investors to buy the shares on the post-earnings pullback, citing the transition to the company’s next-gen datacenter GPU, Volta. He also expects the segment “to resume healthy QQ growth over the next several quarters.”
Canaccord Genuity analyst Matthew Ramsay also boosted his price target for NVIDIA stock, moving from $180 to $170 per share. He felt that Friday’s dip could have been the “entry point many investors have been looking for.” He expects NVIDIA’s datacenter segment, a major part of investors’ disappointment with the last earnings report, to recover in the next quarter. He believes several major datacenter customers delayed their purchases until more models based on the chip maker’s Volta are more widely available.
Stifel analyst Kevin Cassidy called hyperscale datacenter revenue “notoriously lumpy.” As a result, he said that investors shouldn’t expect “steady sequential growth” in the segment. Looking in the long term, he expects 15% to 20% year-over-year growth in GPUs for hyperscale data centers. He raised his price target for NVDA stock from $93 to $110 and reiterated his Hold rating in a note dated Aug. 10.
Short interest in NVIDIA rises
Roth Capital Partners analyst Brian Alger raised his price target for NVDA stock to $150 by applying the same multiple of 33 times updated his fiscal 2019 projection. However, he remains on the sidelines because of the company’s valuation, a common argument among bears.
Going into last week’s earnings report, short interest in NVIDIA surpassed $3 billion, according to financial analytics firm S3 Partners. Research head Ihor Dusaniwsky reported on Aug. 10 that short-sellers cut their short positions 20% or $748 million this year through that date. The chip maker was the worst-performing short in the semiconductor sector as short-sellers were down 44.6% in mark to market losses through Aug. 10.
Short-sellers saw some light at the end of the tunnel on Friday, but it was short-lived, as the Wall Street darling’s stock reversed course today. Dusaniwsky added that the shorts have gotten more active as the year has gone on. Short interest peaked at $4.5 billion year to date in May before falling to $2.4 billion by early July. However, short interest in the name has grown over the last month or so, reaching $3.05 billion leading up to the chip maker’s earnings report.