Deutsche Bank cut its rating on Nvidia (NVDA) to sell from hold, explaining that the company set the bar too high in raising Street expectations about its performance.
Analyst Ben Lynch noted that meanwhile Nvidia's rival ATI Technologies (ATYT) is staging a competitive recovery (the launch of the X1000 series) that will eat away at Nvidia's market share. The analyst added that there is persistent talk of a PlayStation3 delay, which poses the risk of market disappointment on lower/delayed royalties for Nvidia. Lynch also views the risk-reward scenario for investing in Nvidia as negative, with the stock's price to sales ratio at 2.6 times, above prior ex-bubble peaks of 2.2 times. He sees $1.61 fiscal year 2006 (ending January) earnings per share and $1.67 in fiscal year 2007.