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NVIDIA Remains MKM's Top Pick

NVIDIA Corporation NVDA 11.19% reported a 1Q EPS beat, driven by growth in data center, which offset a decline in gaming. MKM Partners’ Ian Ing reiterated a Buy rating for the company, while raising the price target from $39 to $43.

While data center grew 47 percent, gaming was down 15 percent. NVIDIA announced its revenue and gross margin guidance significant ahead of consensus expectations, reflecting the Pascal refresh in gaming with a 53 percent contribution to sales as well as growth in all other segments.

“NVDA continues to be our top pick, given the imminent Pascal gaming refresh and GPUs having unique exposure to a long list of promising applications (core gaming, data center acceleration, virtual reality, autonomous cars and drones) that are outperforming PCs and smartphone opportunities,” analyst Ian Ing wrote.

Pascal Pricing

Pascal has been strategically priced higher than all intended Maxwell replacements, “while still being very aggressive in price-for-performance,” Ing said. He believes that would be little or no price degradation since

  1. $1,100 Titan X has not been widely available since February
  2. Maxwell 980 Ti and 980 blended ASPs are currently at ~$682 and ~$499, respectively

Macro And PC OEM

“Gaming continues to appear to have macro immunity, given a more challenging semiconductor environment and continued headwinds in PC OEM business (implied down ~19% sequentially when stripping out $66M in IP),” Ing added.

DateFirmActionFromTo
May 2016Roth CapitalUpgradesNeutralBuy
May 2016Topeka CapitalUpgradesHoldBuy
Apr 2016Stifel NicolausDowngradesBuyNeutral

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