Nvidia shares drop after guidance cut, downgrades

The stock lost $5.45, or 30.3 percent, to $12.58 in the midday session. Earlier in the day, shares hit a nearly 2-year low of $12.40, a drop of 63.6 percent since the start of the year.

The Santa Clara, Calif., company blamed end-market weakness around the world for the cut, and now expects sales of $875 million to $950 million for the period, below the $1.1 billion analysts polled by Thomson Financial expect.

JPMorgan analyst Shawn Webster was among the analysts who downgraded Nvidia, cutting his rating to "Neutral" from "Overweight," citing "overwhelming evidence of broken execution."

He cut his forecast for fiscal 2009 to a profit of 71 cents per share, on sales of $4 billion, compared with a previous estimate for earnings of $1.29 per share on sales of $4.7 billion.

Prior to Nvidia's announcement, analysts polled by Thomson Financial were expecting earnings of $1.57 per share on sales of $4.71 billion for the year. Those expectations have now dropped an average of $1.46 per share, on sales of $4.51 billion.

Kaufman Bros. analyst Suji De Silva downgraded the company to "Hold" from "Buy" and cut his price target by more than half, to $16 from $33. "We believe NVDA will trade toward the low end of historical levels until production issues are fully resolved," De Silva wrote, using the company's Nasdaq Stock Market ticker.

Wall Street was not universally down on the stock, however. Oppenheimer & Co. analyst Rick Schafer boosted his rating to "Outperform" from "Perform" and set an $18 price target.

"Nvidia's issues are well understood and near-term, and we would use expected weakness today as an opportunity to build positions in a still solid long-term story," Schafer said in a note to clients.

A company representative was not immediately available for comment.