Unfortunately for NVIDIA, Wall Street still vividly remembers the whole NV30 debauchery. Prior to NV30, NVDA was a rockstar stock...I believe it was even the top performing stock one year....When NV30's delays and issues hit, a TON of hedge funds and major investors lost their shirts....Since then, the market has been overly cautious and critical of any news regarding NVDA that wasn't clearly a positive...
Luckily for NVDA, the AMD/ATI combo hasn't been entirely smooth with R600 still MIA and no movement on the notebook front...However, one mistake on NVDA's part and the stock will get punished beyond belief. The NV30 wounds are that deep....
I'd say that's accurate, but does not represent the complete picture. When NVDA first went public in 1999 - during a time of technology stock frenzy - it was extremely cheap on a p/e basis. And this was a company that was profitable and showing very rapid growth. The reason for this was that Wall Street was scarred by flameouts from 3Dfx, S3, NeoMagic, ect... Article after article in the business press hammered home the idea that 3D graphics was an ultra-comptetive industry that would never really allow for decent profits.
A year later it got the Xbox contract and was still experiencing explosive growth so people got excited and the stock really flew. I might note that compared to other high-flying semiconductor stocks - Broadcom, Xlinix, ect... NVDA's p/e was relatively low. It was a top performing stock, but it rose to ridiculously cheap levels.
Just prior to the NV30 debacle and inventory buildup and sales crash, a lot more analysts started following the stock, most of whom had a positive rating on the stock. So when the shit hit the fan, after only covering the company for a short period of time, it probably seemed like the emperor was wearing no clothes, particluarly given the widely held belief that the 3D graphics space was too competitive.
there were already a lot of shorts because of this belief, but it became a free for all. analysts were actively recommending shorting the company at split adjusted prices of $5. But hedge funds only care about tomorrow and in the short term there are plenty of self-fufilling prophecies on wall street.
meanwhile, nvda came back stronger than ever, and with the exception of few, analysts continued to be bearish as the company absolutely blew away all expectations. even today the p/e remains relatively low. yahoo finance shows a consensus estimate of $1.72 for this year. thats a p/e below 17, and nvda could easily beat those estimates.
so true, they could come down hard if nvda missteps, how much lower is there to go. it would have to be a pretty big misstep, and considering that their execution and roadmaps look pretty good. i mean, take the igp space for instance, how far ahead are they of intel and amd when it comes to integration?
