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.