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Nvidia’s over-ambitious 2019 targets could be a disaster waiting to happen

Nvidia expects a 35% growth spurt in Q4, but analysts aren't convinced it can deliver with cryptocurrency out of the picture

Nvidia Jen-Hsun Huang

Nvidia got off the horn with its investors last week offering a dividend to sweeten an otherwise shaky couple quarters. But despite the recent stock crash, Nvidia has high hopes for 2019. It expects a massive 35% growth spurt in Q4 that will more than make up for its recent GPU indigestion – but can it possible deliver?

Many analysts don’t believe it can. Not only is that mammoth Q4 sales growth a lofty target – a proverbial ‘hockey stick’ – it’s up there with the growth experienced by the company when cryptocurrency mining burst into the mainstream consciousness. Nvidia’s stock reached $290 last year at crypto’s peak, but the subsequent crash dragged it all the way down to $127 over Christmas.

Share price has since stabilised at $157. Nvidia’s financial report did some good in regaining some trust amongst investors, though the company is still fending off inventory build-up going into the new year.

“The key question: is a 35% y/y growth exiting FY20 realistic? Our belief is that it is not realistic because it is similar to the growth rates during the crypto-boom,” Loup Venture’s analyst Gene Munster says (via Reuters).

Christopher Rolland over at Susquehanna believes that the full-year outlook will be “extremely challenging”. So too does Kinngai Chan from Summit Insight Group, who believes the company will fall short of making up for its crypto losses this coming year.

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Over the course of the year Nvidia hopes to end up “flat or down slightly” on 2018. Gaming demand slumped 45% in the final quarter of 2018, and Nvidia blames inventory build-up, China ‘macro economics’, and slower than expected high-end Turing GPU sales. We can only assume the $1,200 RTX 2080 Ti isn’t flying off the shelves.

“Our guidance for the next quarter is a make-up of many different types of options across our market segment,” Colette Kress, Nvidia CFO, says (via Seeking Alpha). “We feel confident in terms of that rollout as we provided the guidance today and we’ll just have to see how that pans out.

“Likely, the second half of the year will definitely be stronger than the first half of the year, and that is our expectation at this time,” Kress continues.

Nvidia hasn’t shown much impetus to bolster gaming sales, however, with no signs of discounts or price cuts as of yet. With AMD Navi looming in the mainstream turf war, the green team will have to do more than just rest on its laurels to make up for its revenue deficit. Maybe it’s hoping the GTX 1660 Ti, in all its mainstream nonsensical glory, will be able to offer a helping hand.

Responding to a question regarding how Nvidia will manage this rather spectacular feat Huang says: “the part that you probably didn’t consider is notebook. Our GeForce notebook business is quite large.”

Scepticism aside, its confidence has been convincing where it counts: Wall Street. Nvidia’s stock rebounded a little after its recent slump, and, while some aren’t convinced, there are those financial institutions that believe the green team is back on track for a $200 price target.