Cryptocurrency Mining Drives Nvidia's Q2 Outperformance; Is This An Entry?

NVIDIA Corporation NVDA shares are trading down by more than 4.6 percent Friday after the company reported Q2 revenue and earnings that topped Wall Street’s expectations. The post-earnings sell-off leaves Nvidia investors once again asking themselves a question that has been in the back of their minds throughout the stocks 973 percent gain in the past five year—are Nvidia shares finally too expensive?

According to a pair of Wall Street analysts, the answer to that question is a resounding no. On Friday, Loop Capital Markets analyst Betsy Van Hees reiterated her Buy rating on Nvidia and raised her price target for the stock from $137 to $181.

“We think investors’ concerns that data center growth has slowed and topped out are unwarranted as FQ2 was a transition quarter to Volta,” Van Hees wrote. She said nothing she saw in the Q2 report changed her long-term bullish thesis and Nvidia will likely to return to double-digit data center growth next quarter. In the meantime, she said the post-earnings sell-off is a buying opportunity.

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KeyBanc analyst Michael McConnell isn’t quite so bullish, but sees little downside to Nvidia from its current price. Demand from the booming cryptocurrency mining market alleviated concerns McConnell had over lackluster datacenter revenue (see McConnell's track record here).

“While sustainability is in question, strong GPU demand from the cryptocurrency mining market has rapidly depleted excess channel inventory and buoyed strong OEM sales, which offsets our prior concerns regarding gaming segment growth for the remainder of FY18, as well as record-high DOI and elevated DSO on the balance sheet,” he wrote.

KeyBanc maintains a Sector-Weight rating on Nvidia and has a fair value of $155 for the stock.