Analysts Race to Cut NVDA, AMAT Price Targets After Earnings

The majority of analysts are still bullish toward the chip stocks

by Karee Venema

Published on Nov 16, 2018 at 9:56 AM
Updated on Nov 16, 2018 at 9:58 AM

The shares of Nvidia Corporation (NASDAQ:NVDA) have plunged 18.2% to trade at $166.30 -- fresh off a new annual low of $164.85, and headed for their worst day since July 3, 2008. This is a stinging reaction to the chipmaker's third-quarter earnings report, which beat on the bottom line, but revenue of $3.18 billion fell short of expectations. What's more, NVDA forecast current-quarter revenue well below the consensus estimate, with CEO Jensen Huang citing, "excess channel inventory post the crypto-currency boom."

The results have sparked a wave of bearish backlash from analysts. Among those chiming in were B. Riley, which downgraded NVDA to "neutral" from "buy," and Goldman Sachs, which removed the stock from its "conviction buy" list. And among an onslaught of price-target cuts, Benchmark lowered its target price to $240 from $310, calling the three-month period a "kitchen sink quarter."

The equity is now down more than 43% from its early October lows, and there's room for more analysts to cut their NVDA stock ratings, should this downside continue. The vast majority of covering brokerages still maintain a "buy" or better rating, with not one "sell" on the books. Plus, the average 12-month price target sits all the way up at $247.21.

Applied Materials, Inc. (NASDAQ:AMAT) stock is also selling off after earnings, down 8.1% at $32.18. Last night, the chip equipment maker reported in-line fiscal fourth-quarter adjusted earnings and revenue, but forecast weaker-than-expected current-quarter guidance, with Chief Financial Officer Dan Durn citing, "a significant reduction in semiconductor revenue" and recent restrictions from the Trump administration on chip exports.

At least six analysts have cut their AMAT price targets after the results, too, with Susquehanna setting the lowest bar at $35 -- down from $38, and compared to an average 12-month price target of $48.91. More broadly, most analysts were upbeat toward Applied Materials ahead of earnings, with nine of 17 calling the stock a "strong buy."

Today's negative price action just extends Applied Materials stock's longer-term downtrend, with the shares off 43% year-over-year. Plus, the equity's short-lived bounce off its Oct. 31 annual low of $30.53 was quickly halted near the $35 region -- home to its mid-October bear-gap highs and its descending 40-day moving average.

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