Morgan Stanley Lifts Nvidia Price Target After Strong Q1

NVIDIA Corporation NVDA reported first-quarter results Thursday that turned Morgan Stanley incrementally bullish.

The Analyst

Morgan Stanley's Joseph Moore maintains an Overweight rating on Nvidia's stock with a price target lifted from $258 to $273.

The Thesis

Nvidia's "very strong growth story" not only remains unchanged exiting the Q1 earnings report, but an ongoing concern has been "significantly" derisked, Moore said in a Friday note.

The OEM cryptocurrency segment generated 9 percent of sales; Nvidia's guidance for a 65-percent decline in cryptocurrency implies the business will be "largely irrelevant" at just 3 percent of sales, the analyst said. 

Encouragingly, PC gaming sales were stronger than expected, and "pent-up demand" for mid-range products clearly exists due to recent shortages, Moore said. Nvidia could be working on a consumer version of the Volta architecture ,which supports "ray tracing," or a real-time cinematic quality rendering technique, the analyst said.

Gaming sales should offset expected declines in cryptocurrency-related sales, according to Morgan Stanley..

Nvidia's hyperscale cloud business realized yet another "very strong" quarter, with cloud inference starting to impact overall financial results, given a more than 100-percent quarter-over-quarter growth rate off a small base, the analyst said. 

While Nvidia's stock has gained almost 20 percent in the past month alone, near-term pullbacks should be expected as investors look to take some profits off the table, Moore said — but the longer-term story remains "compelling." 

Price Action

Nvidia shares were trading down 0.66 percent at $258.42 at the time of publication Friday. 

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Photo courtesy of Nvidia.