Long-Time Nvidia Bear Upgrades Stock, Lifts Target To $200
A prior negative stance on Nvidia was based on a view that the gaming business would see a "marked deceleration" in 2017, Srivastava, one of the few Nvidia bears, said in a note. But Nvidia's inclusion in Nintendo consoles along with the growing cyptocurrency market helped the company grow its business at a higher level than previously expected.
Nvidia's DCG (data center group) business also performed better than expected as the company capitalized on the growing artificial intelligence market, the analyst said. In fact, the recent earnings report showed the segment is on pace for a $2 billion run rate,which "made us question whether the market is indeed far greater than what we had expected previously." The leverage in Nvidia's business model is "far greater" than what was previously expected.
Srivastava's prior stance suggested that the stock's valuation is overvalued on every metric. The analyst's revised $200 price target is based on a P/E Multiple of 45x calendar year 2018 EPS, which is premium versus the group's multiple of 16x and the stock's current multiple of 48x.
Shares of Nvidia were trading lower by around 1 percent at $214.12 Monday morning, but are higher by nearly 100 percent year to date.
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