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Here's What to Expect from Nvidia (NVDA) Stock in 2019

Benjamin Rains

Nvidia NVDA stock has plummeted 46% over the last three months as part of the broader market downturn, driven by giants like Apple AAPL. But shares of NVDA did surge Monday, along with AMD AMD and Micron MU. So, is Nvidia due for a 2019 comeback after its late-year tumble on the back of slowing revenue growth? Let’s see what investors should expect from Nvidia in 2019 to find out.

Overview

Nvidia is coming off a disappointing third quarter that saw its revenues fall short of estimates despite climbing 21%. More importantly, the chip power’s Q4 top-line outlook of $2.70 billion came in well below Wall Street’s $3.40 billion estimate. NVDA’s revenues suffered as cryptocurrency mining-based demand for its GPUs fell for the second quarter in a row.

With that said, Nvidia’s insane, roughly three-year climb would have made it extremely hard to continue to impress investors. Therefore, it seems that NVDA stock was bound to hit a correction, and it happened to coincide with the broader market downturn that hit everyone from Amazon AMZN to Alphabet GOOGL.

Nvidia saw its stock price jump 6% through late-afternoon trading Monday to reach roughly $144 a share. This still marked a 50% downturn from its 52-week high of $292.76 per share and sets up what could be a solid buying opportunity for NVDA.

Outlook

The company is still a leader in cutting-edge graphics chips that help create more life-like video games. Despite its recent decline, Nvidia’s chips also help power datacenters, and the company is set to benefit from the growth of cloud computing, artificial intelligence, and machine learning. And Nvidia launched its new Turing GPUs, which CEO Jensen Huang called his company’s “most important innovation in computer graphics in more than a decade,” in 2018 after nearly two years of anticipation.

Plus, Nvidia and Huang just said on Sunday that the firm is set to release a new, lower-priced version of its newest Turing-based graphics cards, called the RTX 2060. The firm also made a series of other announcements at an early CES news conference.

Moving on, investors likely won’t be pleased to see that Nvidia's Q4 fiscal 2019 revenues are projected to fall by 7.2% to reach $2.70 billion, based on our current Zacks Consensus Estimate. Meanwhile, the company’s full-year revenues are expected to climb 25.7% to hit $12.21 billion—NVDA’s fiscal 2018 revenues surged 41%.

Peeking ahead even further, the firm’s fiscal 2020 revenues are projected to climb just 4.3% above our current year estimate to reach $12.73 billion. Clearly, investors looking for massive top-line growth might move on from Nvidia based on these projections.

Earnings

At the bottom end of the income statement, Nvidia is also expected to see its adjusted quarterly earnings sink 18% from the year-ago quarter. NVDA’s full-year earnings are projected to soar over 47%, but this growth estimate is based on bottom-line expansion from the previous three quarters. Maybe worse still, Nvidia’s fiscal 2020 EPS figure is projected to slip 1.9% below our current year estimate.

On top of that, Nvidia’s earnings estimate revisions have all trended in the wrong direction recently.

Bottom Line

Nvidia is currently a Zacks Rank #4 (Sell) based, in large part, on the company’s recent earnings estimate revision activity. And the chip firm’s top and bottom-line outlooks aren’t inspiring compared to NVDA’s recent performances.

This could mean 2019 is set to be a down year for Nvidia stock. But let’s not forget that shares of NVDA do rest 50% below their 52-week high, which means the company could be in for a comeback based mostly on its perceived discount.

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