NVIDIA Corporation NVDA is experiencing a rough time due to a string of weaknesses plaguing the semiconductor market during the second half of 2018.
The recent report on SoftBank Group Corp's plan to sell its stake early next year dealt another blow to the chipmaker. Notably, after NVIDIA delivered a huge earnings beat in the first quarter of fiscal 2017, the Japanese investor bought a $4-billion stake in the company. The Japanese firm's massive bet on NVIDIA suggested that it had more upside ahead in the coming years.
However, the persistent decline in NVIDIA's share price since Oct 1 has compelled the firm to contemplate a stake sell. Reportedly, the firm could earn about $3 billion in profit from the deal. Nonetheless, per Bloomberg, no final decision has yet been taken.
Notably, following this news, the NVIDIA stock dipped more than 2% on Dec 11 to close at $148.49. Since Oct 1, shares of the company have shed 48.9% of its value, comparing unfavorably with its industry 's 19.1% decline.
The above downside is attributed to the company's discouraging third-quarter fiscal 2018 performance and a downbeat view for the fiscal fourth quarter.
Estimates Moving South
Analysts have been increasingly growing bearish on the stock over the past couple of months with all estimates being revised downward while no movement has been noticed in the opposite direction for the ongoing quarter as well as the fiscal year.
The company's fourth-quarter fiscal 2018 earnings estimates moved south from $2 cents to $1.41 in the past 30 days. Further, in the same time period, the company's fiscal 2018 earnings estimates have been lowered from $7.96 to $7.24.
NVIDIA Corporation Price and Consensus
NVIDIA Corporation Price and Consensus | NVIDIA Corporation Quote
What's Bothering the Stock?
Soft Gaming segment, affected by an excess inventory of midrange Pascal products, is an overhang on the company.
Inventory level of midrange Pascal gaming cards remained better-than-expected as demand from gamers failed to grow rapidly to offset the sluggish cryptocurrency-related requirement. Consequently, shipment was badly hit as the price of graphic cards was still elevated.
On the last earnings call, management mentioned that it will take two quarters to normalize the channel inventory. The company's guidance for the fiscal fourth quarter indicates its suspension of mid-range Pascal GPU shipments in order to normalize the channel-inventory levels.
Moreover, thanks to the normal seasonal build cycle that the company anticipates lower sales of Tegra chips for game consoles to pose a threat to its gaming segment, the major revenue contributor.
Zacks Rank & Stocks to Consider
NVIDIA currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader Computer and Technology sector are CACI International CACI , Intel INTC and Symantec Corporation SYMC , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Long-term earnings growth rate for CACI, Intel and Symantec is projected at 10%, 8.42% and 7.9%, respectively.
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