Wells Fargo analyst Aaron Rakers upgraded Nvidia (NVDA) two notches to a Buy-equivalent rating from a Sell-equivalent one, based on a long-term view of its competitive position in gaming and expanding growth opportunities in data center and autonomous vehicles. The company is expected to report second fiscal quarter after the market close on August 16, with a conference call scheduled for 5:30 pm ET.

NVIDIA DOUBLE-UPGRADED AT WELLS FARGO: In a research note to investors, Wells Fargo’s Rakers upgraded Nvidia two notches to Outperform from Underperform and raised his price target to $315 from $140, based on a longer-term view of the company’s competitive position in gaming and expanding growth opportunities in data center and autonomous vehicles. While noting that he expects Nvidia to report positive second-quarter results, Rakers said he believes the company is well positioned to continue to leverage/expand its platform story.

Additionally, the analyst pointed out that he is positive on Nvidia given its new Turing GPU architecture, new Quadro RTX product cycle commencing in the fourth quarter, expansion in Artificial Intelligence, and significant government-funded projects for next-generation supercomputers. While Rakers acknowledged that concerns over gaming GPU channel inventory levels vis-a-vis weakening crypto-currency mining demand could persist, and thus result in a perceived delayed launch of consumer Volta solutions, he thinks these concerns are well-understood and miss the long-term architectural shifts and secular growth drivers moving in Nvidia’s favor.

WHAT TO WATCH FOR INTO EARNINGS: During the company’s last earnings call, Nvidia said it sees second-quarter revenue of $3.1B plus/minus 2%, with consensus at $2.95B. CFO Colette Kress also said that the company expects cryptocurrency-related revenue to drop 65% to about $100M in the second quarter, according to Reuters. Looking ahead, Bank of America Merrill Lynch analyst Vivek Arya said in a research note on June 14 that Nintendo’s (NTDOY) unveiling of potentially “platform-defining titles” at the E3 show could drive more sustained demand for the Switch and could accelerate demand for Nvidia GPUs in 2019. Meanwhile, Nvidia has launched its Turing GPU architecture, featuring new RT Cores to accelerate ray tracing and new Tensor Cores for Artificial Intelligence inferencing which, together for the first time, make real-time ray tracing possible.

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