NIVIDIA Plays out as Predicted After Pre-Market Decline

Not surprisingly, shares of NIVIDIA (NVDA) closed regular trading down 30.7% at 12.39, adding to its 26% pre-market drop to 12.98 after it was cut to Neutral vs Overweight at JP Morgan this morning. Our historical downgrade reaction history demonstrates a consistent tendancy to drop further in regular session trade following a drop ahead of open on similar news.
The rating change follows a deep extended-hours decline Wednesday night after the company said Q2 revenue is now estimated to be from $875 million to $950 million, below the Street view.
Separately, NVIDIA plans to take a one- time charge from $150 million to $200 million against cost of revenue for the second quarter to cover anticipated warranty, repair, return, replacement and other costs and expenses, arising from a weak die/packaging material set in certain versions of its previous generation GPU and MCP products used in notebook systems.
NVDA tends to favor regular session widening of its pre-market analyst-driven movement, having increased its early day performance by the regular session close in five of the last eight rating changes we've tracked; one of the exceptions was today's response.
7/3/08 Pre-Market: -26% to 12.98; 7/3/08 Regular Session: -30% to 12.39 - JP Morgan cut to Neutral.
1/15/08 Pre-Market: -3.8%; 1/15/08 Regular Session: -6.5% - Deutsche Bank cuts rating to Hold vs. Buy.
10/29/07 Pre-Market: -3.8%; 10/29/07 Regualr Session: -2.9% - Lehman downgrade to Equalweight from Overweight.
10/11/07 Pre-Market: -1%; 10/11/07 Regular Session: -5% - ThinkEquity downgrades to Accumulate from Buy.
6/25/07 Pre-Market: -2.2%; 6/25/07 Regular Session: -2.4% - Goldman Sachs downgrade to Neutral from Buy.