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Data Center Is The 'Most Exciting Aspect' Of NVIDIA's Story

Data Center Is The 'Most Exciting Aspect' Of NVIDIA's Story - NVIDIA Corporation NASDAQ:NVDA

Everyone was expecting strong results from NVIDIA Corporation NVDA, but the impressive part was the third quarter outlook. The semiconductor firm guided revenues 16 percent above consensus, with strong operating margin fall through driving EPS over 40 percent above Street view.

Morgan Stanley attributed the strong forecast to the Pascal product cycle, as the first process node transition in over four years is resonating with consumers and the growth in data center appears to be picking up steam.

The company guided third quarter revenues to be $1.68 billion at the mid point, up 28.7 percent year-over-year, versus Morgan Stanley estimate of $1.45 billion. The brokerage raised its EPS estimate to $0.56 from $0.41 (consensus $0.43) and revenue view to $1.68 billion from $1.44 billion.

Morgan Stanley also hiked its FY2017 revenue estimate to $6.15 billion from $5.57 billion and GAAP EPS view to $1.92 from $1.57.

"We see continued strength in data center as the most exciting aspect of the story, with some deceleration in gaming growth beyond October; growth warrants premium valuation," analyst Joseph Moore wrote in a note.

In addition, for the third quarter, Moore expects sequential growth of 27 percent in gaming, 32 percent growth in data center and single-digit growth in autos and workstation.

Moore also raised his price target to $64 from $55.

"We feel like we've missed too much of the move in the stock to move to Overweight at this point, so we remain EW, but certainly have been impressed by the company's execution, and would expect the stock to continue its move higher near term," Moore noted.

Shares of Nvidia closed Thursday at $59.70. In the pre-market hours, they gained 3.27 percent to $61.65.

Aug 2016RBC CapitalUpgradesSector PerformOutperform
Aug 2016Deutsche BankMaintainsHold
Aug 2016BarclaysMaintainsUnderweight

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