Wedbush Downgraded Nvidia - Read Why

  • Wedbush analyst Matt Bryson downgraded NVIDIA Corp NVDA to Neutral from Outperform with a price target of $300, up from $220, implying a 1.3% downside to November 11 closing price of $303.90.
  • The analyst cites valuation for the downgrade, with the shares trading at 55 times his 2024 numbers.
  • He would have to lift the multiple to 67x to justify Outperform, suggesting Nvidia valued at ~7X its stated 2024 TAM and ~25X sales. Conversely, he would have to double his sales growth assumptions (from ~20% to ~40%) over the next couple of years to continue to use a 40X multiple to value Nvidia. 
  • However, Bryson believes the combination of "unprecedented demand" for both data center and client offerings will allow Nvidia to exceed expectations again next week when its reports. 
  • Nvidia's continued work in building out its AI software will further solidify its AI leadership.
  • Client GPUs have again become difficult to source, helped by a combination of solid gaming demand and crypto mining requirements.
  • New opportunities, particularly the Metaverse and its graphics-intensive requirements, have started to realize the increased investment. 
  • He sees no "negative catalyst" for the stock and improving fundamentals for Nvidia but downgrades the shares on valuation.
  • Price Action: NVDA shares traded lower by 1.15% at $300.40 in the premarket session on the last check Friday.
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