On Friday, Wedbush analyst increased the price target on NVIDIA (NASDAQ:NVDA) shares to $800 from the previous $600 while maintaining an Outperform rating. The revision reflects the analyst's anticipation that NVIDIA will surpass estimates and provide strong forward guidance.
NVIDIA's performance has been buoyed by positive trends noted during analyst travels in Asia in mid-December, where component suppliers and Original Design Manufacturers (ODMs) indicated robust performance for the quarter and projected further solid growth for Q1. Concerns at that time were focused on the potential slowdown in Cloud Service Providers (CSPs) growth later in 2024. However, recent earnings reports from CSPs have shown no signs of a slowdown in AI infrastructure spending, with several large data center operators announcing plans to increase capital expenditures in 2024, primarily driven by investments in AI.
Additionally, meetings with memory vendors last week suggested strong demand for High Bandwidth (NASDAQ:BAND) Memory (HBM), with NVIDIA being the largest end customer for these components in 2024. The company's success is further evidenced by the continued flow of news highlighting capital raises for AI startups, which is expected to benefit AI infrastructure providers both directly and indirectly.
Super Micro Computer, Inc. (NASDAQ:SMCI) reported a significant acceleration in sales during the quarter, with management noting that despite the revenue increase, the company still experienced growth in backlog, likely driven by AI sales. Similar sentiments were echoed by other major server Original Equipment Manufacturers (OEMs) as recently as last week, indicating a rising backlog due to better sales momentum.
Wedbush's revised price target of $800 is based on applying a 33X multiple to NVIDIA's fiscal year 2026 earnings per share estimate. This multiple is expected to decrease once NVIDIA reports its financial results and the analyst's model is adjusted. Despite the high multiple, the analyst expressed confidence in the valuation, citing NVIDIA's triple-digit growth rates, improving gross margins, operational expenses lagging behind growth, and no visible risks to the company's momentum in the coming quarters. The last downgrade of NVIDIA occurred when the multiple approached 50X.
InvestingPro Insights
Amid the positive outlook from Wedbush analysts, NVIDIA (NASDAQ:NVDA) stands out with a series of robust financial metrics and market expectations. According to InvestingPro data, NVIDIA's market cap has soared to an impressive 1810.0 billion USD, reflecting the company's significant presence in the market. This is bolstered by a remarkable revenue growth rate of 57.07% over the last twelve months as of Q3 2024, showcasing NVIDIA's capacity to expand its financial top line at an accelerated pace.
Furthermore, NVIDIA's gross profit margin stands at a healthy 69.85% for the same period, indicating the company's efficiency in managing its cost of goods sold and maintaining profitability. However, the Price/Earnings (P/E) ratio is currently high at 95.22, suggesting that investors are willing to pay a premium for NVIDIA's earnings, possibly due to their strong growth expectations and the company's dominant position in the industry.
InvestingPro Tips highlight that NVIDIA is not only a prominent player in the Semiconductors & Semiconductor Equipment industry but also has a perfect Piotroski Score of 9, which is indicative of the company's solid financial position. Additionally, analysts anticipate sales growth in the current year, reinforcing the sentiment that NVIDIA's upward trajectory is expected to continue. For investors looking for more insights, there are 24 additional InvestingPro Tips available, which can provide a deeper analysis of NVIDIA's financial health and market performance.
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