"While Nvidia (NVDA) is doing well in enterprise graphics, the consumer side has peaked, with gaming growth offset by mainstream PC declines," writes BofA/Merrill's Adam Gonzalez, cutting shares to Underperform.
Gonzalez declares Nvidia to have a "stretch valuation," is worried margins may be peaking, and expects only modest sales growth going forward.
He also notes there's "considerable investor debate" on whether Nvidia's Intel royalty deal (responsible for ~30% of EPS) will be renewed beyond 2017.
Shares currently go for 15x FY15 (ends Jan. '15) EPS exc. net cash. RBC upgraded Nvidia to Outperform last month as part of a bullish call on the semi industry.