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Morgan Stanley Cuts NVIDIA’s Earnings Estimates.

Category: Video

by Anton Shilov

[ 10/17/2002 | 01:32 PM ]

NVIDIA was indisputably the fastest developing company in late nineties, however, its brightest days are over. Not as if they were unprofitable or their revenues were too small, just their growth has ended and they hardly will be able to get their revenues up in the next couple of years. As we know, the market will not grow significantly in 2003, hence, the chances of a company that makes graphics chips to increase their sales and revenues are not very high.

As I have read over Reuters, brokerage Morgan Stanley cut its fiscal 2003 and 2004 earnings estimates for NVIDIA on Wednesday, citing the impact of pricing on gross margins.

Morgan Stanley analyst Mark Edelstone cut his fiscal 2003 and 2004 earnings per share estimates to $0.60 each. His 2003 estimate had been $0.80 and his 2004 estimate had been $1.05. Diluted net income per share in fiscal 2001 was $0.53 and diluted net income for fiscal 2002 was $0.64 per share. So, in general, analysts expects the present fiscal year not to be considerably better or worse compared to 2002.

The analyst said that aggressive pricing trends were likely to significantly hamper gross margins for the next 12 months, and most of the earnings adjustments result from lower profitability assumptions. He seems to be quite right as the decreasing ASP is a widely-known problem for all the players of the IT industry,

Mark Edelstone reiterated an "equal-weight" rating on the stock, but cut his 12-to-18 month price target on the stock to $18 from $28. It is still rather optimistic prediction, as currently a share costs almost two times less.

The year range on NVIDIA’s shares is $7.20 to $72.66, at the moment of publication, an NVIDIA’s share cost $9.38 at Nasdaq. In fact, the shares on the Santa Clara-based GPU developer are down about 85% for the year, compared to a drop for the year of nearly 25% for the S&P 500 index.

Although ATI Technologies reported only $0.20 adjusted net income per share (see this news-story), it is hard to predict their figures for the next years for them, since they have much broader product portfolio, however, we cannot say whether their products are going to be successful or not.