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Nvidia Bears Still Exist: Wells Fargo Keeps Stock Rated Underperform

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Nvidia Bears Still Exist: Wells Fargo Keeps Stock Rated Underperform

NVIDIA Corporation (NASDAQ: NVDA), one of the hottest stocks over the last two years, reported its third-quarter earnings, which could re-start the bull versus bear debate as the stock trades at an all-time high and investors question what is an appropriate valuation moving forward.

The Analyst

Wells Fargo's David Wong.

The Rating

Wong Maintains an Underperform rating on Nvidia's stock with a price target raised from $75 to $87.

The Thesis

Nvidia's earnings report showed "impressive" sales momentum, which grew 18 percent sequentially and 32 percent year-over-year, Wong said in a note. GAAP gross margin improved from 58.4 percent in the prior quarter to 59.5 percent. The company also showed revenue growth on a sequential and year-over-year basis across every segment, except OEM & IP which saw a 24 percent drop sequentially but was up 3 percent year-over-year.

Despite Nvidia's clearly "strong product offerings" across multiple high growth markets, the stock's valuation needs to be considered. The analyst's fiscal 2019 EPS estimate was boosted from $3.45 to $4.34 and an appropriate price target multiple on 2019 EPS is 20x which implies an $87 price target.

Price Action

Shares of Nvidia were trading higher by more than 5 percent early Friday morning at $215.92, which is above the prior 52-week high of $212.90.

Related Links:

Expectations Mount For Nvidia; Analyst Raises Target To $190 Ahead Of Earnings

Sizing Up The Sizzle In Semiconductor ETFs

Image Credit: By yoggy0 from Yokohama, Japan (SIGGRAPH Asia 2009) [CC BY 2.0], via Wikimedia Commons

Latest Ratings for NVDA

DateFirmActionFromTo
Feb 2021Cowen & Co.MaintainsOutperform
Feb 2021JP MorganMaintainsOverweight
Feb 2021Deutsche BankMaintainsHold

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View the Latest Analyst Ratings

 

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