Nvidia Corporation (NASDAQ:NVDA) reported its first quarter 2022 earnings after the bell on May 25. The company posted record quarterly revenue of $8.29 billion, up 46% from a year ago. Two very important divisions — Gaming and Data Center — also set quarterly revenue records. Adjusted EPS of $1.36 topped analyst expectations.
Moreover, the company announced it is committed to continuing and increasing its share repurchase program. In fact, it will spend up to a total of $15 billion through December 2022. That all sounds pretty good if you’re a shareholder.
However, despite what looks like another solid quarter for the company, NVDA stock dropped in pre-market trading. At this point it is rallying, but why the initial reaction? It was all about the second quarter. Or more accurately, Nvidia’s Q2 guidance. The company’s revenue guidance of $8.1 billion, “plus or minus 2%” came in well below analyst expectations of $8.44 billion.
That Q2 guidance may have spooked the market, but I’ll explain why it shouldn’t spook you. And why NVDA stock — currently down more than 35% in 2022 — is a great buy right now for investors in search of long-term growth investments.
Impact of Outside Factors on Nvidia Is Temporary
As I touched on, the big problem with Nvidia’s Q1 earnings was the guidance for Q2. Specifically, the company spiked out an estimated $500 million reduction because of “Russia and the COVID lockdowns in China.”
Furthermore, look at the analyst projections for $8.44 billion in Q2 revenue and you’ll quickly see that Nvidia was positioned to possibly top that. But, the Russian invasion of Ukraine and China’s Covid-19 lockdowns are instead playing spoiler.
That’s bad news for Q2 but what about in the long-term? The Covid-19 lockdowns in China are beginning to ease. And while the war in Ukraine is showing no signs of going away any time soon, it too is a temporary situation. How temporary is anyone’s guess, but don’t expect it to be a long-term drag on Nvidia’s business. In terms of dollars, it is estimated that Russia represents approximately 2% of Nvidia’s overall revenue. So even if that sting lasts longer than expected, it’s not a particularly painful sting.
Analysts Still Love NVDA Stock, For Good Reason
Overall, Nvidia is a company that investment analysts generally agree on — and their take remains bullish. Despite the company’s disappointing guidance for Q2, 33 out of 47 analysts polled by the Wall Street Journal still have NVDA stock rated as a “buy.” That said, the price target is where you’ll see some variation. However, the analysts’ average 12-month price target of $259.95, which offers around 40% upside from its current price.
In short, that shows confidence that the issues currently pushing down NVDA’s value will be relatively short-lived. The ratings also show that most analysts have confidence that this company has what it takes to ramp up its stock price once the current challenges are in the rearview mirror.
For an idea of what Nvidia investors have to look forward to you may want to see what I wrote about Nvidia in April. When you see what the company has coming in the pipeline — including all-new RTX 40 series graphics cards this fall and future metaverse developments — you’ll understand why buying NVDA stock at current prices seems like a no-brainer.
So, if you’re in it for long-term growth, Nvidia stock is one to look at for the long-term. The stock is rated as an “A” in my Portfolio Grader, is deeply discounted and well worth adding to your portfolio.
— Louis Navellier and the InvestorPlace Research Staff
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Source: Investor Place