Investor sentiment is running at its all-time low along with market indices that are experiencing one of the most turbulent times. With so much volatility in the background, it is becoming increasingly difficult to gauge which sectors will outperform in the near term.
Last week, a few of the major semiconductor companies reported a mixed bag of results. However, analysts remain highly bullish on the sector's long-term performance.
TipRanks’ Expert Center combines the opinions and transaction histories of the world’s top financial experts. Following this might provide a much-needed boost to your investment returns.
In our “Expert Spotlight” today, we will look at the recommendations of five-star analyst Richard Schafer, better known as Rick Schafer, who has expertise in covering U.S. listed stocks from the technology sector.
Schafer is the Managing Director and Senior Equity Analyst at the renowned Wall Street firm Oppenheimer & Co. since 1997. Schafer also heads the company’s semiconductor franchise. Before joining Oppenheimer, Schafer was a financial analyst at LCC Eurofon, LLC, and also worked at Schafer Systems.
Schafer has an International MBA degree from the University of South Carolina and holds a Bachelor of Science degree in Finance and Multinational Business from Florida State University.
Schafer’s Rank on TipRanks’ Experts ListAccording to the TipRanks Star Ranking system, Schafer ranks #6 out of the 7,945 analysts in its universe. Furthermore, out of the 19,346 experts tracked overall, Schafer holds the #10 position.
Notably, Schafer has a success rate of 78% with an average return of 26.9% over the past year. Moreover, his calls have generated an alpha of 11.5% and 4.3% over the S&P 500 (SPX) and the technology sector, respectively, during the same period.
As seen from the majority of his calls, Schafer is highly optimistic about the technology sector. Notably, 56.1% of his recommendations are Buys, while 41.6% have a Hold rating, and 2.3% have a Sell rating.
Nvidia Corporation (NVDA)California-based tech giant NVIDIA specializes in the manufacture of graphics processing units (GPUs), chipsets, and related multimedia software. Nick has a Buy rating and a $300 price target on NVDA stock, which implies 59.5% upside potential to current levels.
The analyst believes that Nvidia is well positioned for substantial growth across Data Center/Artificial Intelligence, Gaming, and Auto segments, and expects semiconductor supply issues to cool off in the second half of calendar 2022.
Other analysts also resonate with the same sentiment and have awarded Nvidia a Strong Buy consensus rating based on 27 Buys and five Holds.
Schafer’s most profitable call have been on NVDA between August 16, 2019 and August 16, 2020. Schrafer generated a whopping 190.7% return on his Buy call on NVDA during that time.
Schafer has given consistent Buy ratings on NVDA stock since 2018 with a success rate of 78% and generated an average return per rating of 62.3%.
Broadcom (AVGO)Next up is semiconductor and infrastructure software solutions provider Broadcom. Schafer reiterated a Buy rating on AVGO stock with a $720 price target, which implies 23.4% upside potential to current levels.
Schafer has given consistent Buy recommendations on AVGO stock since 2018, with a 93% success rate, and has generated a 31% average return per rating on the stock.
Remarkably, Broadcom announced its intent to acquire cloud software company VMware (VMW) for $60 billion in a cash and stock deal, which has piqued the interest of both shareholders and analysts.
Schafer believes the VMware deal will be approximately 15% accretive to Broadcom’s calendar year 2023 earnings per share and will prove advantageous to its cloud, wireless, and software businesses.
With 15 unanimous Buys, the AVGO stock commands a Strong Buy consensus rating. The average Broadcom price forecast of $710 implies 21.7% upside potential to current levels. Meanwhile, its stock has lost 11.5% year to date.
Ending ThoughtsAlthough the semiconductor sector is witnessing a difficult time due to the global chip shortage, Schafer expects the supply issues to soften in the second half of the year. Once the issues are resolved, the pent-up demand for the chips is expected to create exponential growth for the semiconductor players, and adding them to your portfolio might prove to be beneficial in the long run.
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There’s no escaping the difficult macroeconomic environment as was evident in Nvidia’s (NVDA) latest quarterly report. Over the past few years, the chip giant has habitually delivered beat-and-raise results. But although the company came good this time around on the “beat” element, the “raise” factor was missing.
In F1Q23, Nvidia generated revenue of $8.29 billion, amounting to a 46.3% year-over-year increase and coming in above the $8.11 billion anticipated by analysts. Similarly for the bottom-line, Nvidia beat Wall Street’s expectations, dialing in adj. EPS of $1.36 vs. the $1.29 consensus estimate.
As expected, Data Center put in a strong performance, showing a sequential uptick of 15% to reach $3.75 billion, in the process finally overtaking Gaming as Nvidia’s main breadwinner. Additionally, given the ongoing strength amongst its clientele (Hyperscalers and Verticals), end-products (Networking and Compute), and applications – and all given a boost from the anticipated launch of the Hopper GPU in 3Q – the outlook called for more growth for Data Center for the rest of the year.
However, for the current quarter, Nvidia guided for revenue of $8.1 billion, below the Street’s $8.54 billion forecast.
Evercore analyst CJ Muse believes the weak guide was not down to slowing global consumer demand for Gaming but rather mainly on account of the Covid lockdowns in China “weighing” on Gaming demand. However, the outlook for Gaming “remains a bit uncertain,” and investors would have preferred more clarity on the expected trajectory for the segment. Nevertheless, with Chinese lockdowns being phased out, Nvidia remains “upbeat” on the outlook for 2HCY22.
And so is Muse, who thinks shares are now at a point they are just “too cheap to ignore.”
“July Q revenues should mark a bottom with a clear path to sequential growth into both the October and January quarters,” the 5-star analyst said. “We think this is enough to suggest the bottoming process for NVDA shares is coming to an end (now down -54% from 52wk high vs SOX -29%). Add in a well-intact long-term growth story and we continue to find shares nearing our estimated floor of $150 as truly compelling.”
As such, Nvidia stock remains a “Top Pick” for Muse, who reiterates an Outperform (i.e., Buy) rating along with a $300 price target. The implication for investors? Potential upside of 77%. (To watch Muse’s track record, click here)
It’s mostly Buys from Muse’s colleagues too – 27, in total – while the addition of 5 Holds can’t detract from a Strong Buy consensus rating. The average target, at $272.41, suggests shares will climb ~53% higher in the year ahead. (See Nvidia stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.