Nvidia Corp.’s stock has been a massive outperformer lately, and the company’s latest results suggest to some analysts that the run-up is not finished.
Taking into account a 12% Thursday gain as of midday, Nvidia shares are up 59% this year, as the S&P 500 has risen about 4% and the PHLX Semiconductor Index has rallied 16%.
“In hindsight, we acknowledge that our decision to remain on the sidelines in anticipation of a pullback in the company’s fundamentals was wrong,” Goldman Sachs analyst Toshiya Hari wrote as he upgraded Nvidia’s stock to buy from neutral Thursday.
He added that “the combination of positive estimate revisions and a potential
expansion in the stock’s multiple — consistent with historical recovery phases — will drive continued outperformance in the stock.”
Hari is increasingly upbeat about Nvidia’s opportunity in artificial intelligence, a key topic of conversation on Wednesday afternoon’s earnings call.
“Given the recent emergence and potential proliferation of generative AI, we envision the rate of Nvidia’s wallet-share growth within the context of overall cloud [capital expenditures] accelerating in the near to medium term,” Hari wrote.
Bernstein’s Stacy Rasgon also sees more room to rally for Nvidia shares. “Given the run the stock has had we believe many were nervous into the print, but the results seem to bolster the set-up from here which seems good at this point,” Rasgon wrote. “Tactically, following the results investors can now buy the stock at the start of a datacenter ramp, with a strong (and roughly normalized) gaming trajectory.”
Rasgon also noted that “there are further elements now starting to emerge that can let longer-term investors dream the dream,” including opportunities in AI software and Mercedes automotive software.
He rates Nvidia’s stock outperform and bumped his price target up to $265 from $200.
UBS analyst Timothy Arcuri was similarly upbeat.
Arcuri wrote that UBS has “long said that NVDA is a product-cycle stock,” and it now is “on the cusp of what might be the strongest new-product cycles and [total addressable market] expansion in the history of the company.”
He allowed that “other derivative ways to play AI” exist but said that none of those come close to Nvidia. UBS is maintaining a buy rating on the stock and keeping a $270 share-price target intact.
Of the 45 analysts tracked by FactSet who cover Nvidia’s stock, 30 have buy ratings on it, while 13 have hold ratings, and two have sell ratings. The average share-price target is $238.09.
One of the sidelined analysts, Matt Bryson of Wedbush, didn’t change his neutral rating despite seeing “a lot to like” in the latest Nvidia numbers.
“We remain very optimistic around the company’s longer-term opportunity and [its] positioning in its core markets, but are somewhat wary of the high valuation, particularly in light of a difficult macro backdrop,” he wrote.