On Thursday, shares of graphics chip maker NVIDIA Corp. NVDA are tumbling, down over 9% in late morning trading after multiple analysts downgraded the stock.
Instinet, an institutional, agency-only broker turned bearish on NVIDIA, citing major concerns on slowdown within the gaming industry. Analyst Romit Shah downgraded NVDA stock to Reduce from Buy, and cut his price target from $100 to $90, which is 19% below Wednesday's closing price of $110.76 per share.
"We believe consensus is underappreciating a slowdown in gaming and the potential negative impact to the multiple," Shah wrote in a note to clients Wednesday. "We recommend investors take profits." He also said that NVIDIA was trading at a "significant premium" to its peers, and that "investors should recognize that the market's enthusiasm for NVIDIA's emerging businesses is historically short-lived."
Shah recommended investors "rotate" into Intel Corp. INTC , a stock which he continues to rate a Buy.
BMO Capital analyst Ambrish Srivastava seems to agree, and downgraded NVIDIA as well on Thursday from Market Perform to Underperform. He also lowered the price target from $100 to $85.
"We believe the stock is overvalued at current levels. We believe that the perfect storm in fundamentals that drove the rarely seen magnitude of earnings upside is ebbing," he said. Srivastava also thinks the competitive environment, in datacenters and gaming, for the chip maker is changing, will likely be different through 2017.
NVDA stock has more than tripled over the past year, increasing around 251% thanks to better-than-expected sales results from its graphics card segment.
Which Stocks are Zacks Experts Talking About?
Stocks in today's headlines may be tempting buys, but how would you like a sneak peek at the stocks Zacks experts recommend? Starting today, for the next month, you can follow all of Zacks' private buys and sells in real time. You can track value and momentum stocks, ETFs, stocks under $10, options moves, insider trades, and stocks set to report positive earnings surprises (we've called them with 80%+ accuracy). Click here for all Zacks trades >>