All the recent buzz around AI has done absolutely no harm for Nvidia (NASDAQ:NVDA) stock. Seen as extremely well-positioned to benefit from this secular trend, the shares have accumulated year-to-date gains of ~110%.
Heading into the chip giant’s first quarter of fiscal 2024 results (April quarter), which the company will announce after the closing bell today (May 24), Stifel analyst Ruben Roy thinks the AI opportunity is about to make itself felt.
“We are expecting strong results and outlook as NVDA’s data center GPU products continue to garner strong demand from both AI-focused and broader data center demand,” the 5-star analyst said. “While the macro remains choppy, as illustrated in the majority of data center/enterprise-focused peer group companies through C1Q earnings, NVDA remains the best-positioned component/ systems company to benefit from the AI investment cycle in the medium term, in our view.”
Roy thinks Nvidia will generate F1Q24 revenue above the midpoint of its guide for $6,500 million and the Street’s forecast of $6,532 million, with the analyst assuming “modest growth across all segments.” Roy expects a gross margin of 66.5%, the same as the company’s guide.
Looking further ahead, while Roy makes no changes to his F2024 estimates, for F2025, in anticipation of elevated growth of its Data Center segment (up by 41% year-over-year vs. 25% beforehand), Roy has raised the revenue and EPS estimates from the prior $35,450 million and $5.65 to $37,835 million and $6.18, respectively.
So, with all that as background, time to pick up NVDA shares ahead of the latest quarterly statement? Not quite. According to Roy, Nvidia is a victim of its own success, its valuation metrics having risen “well above historical averages.” As such, while Roy’s price target is bumped up to $300 from $225, the new objective still comes in just below the current $301 share price. Roy’s rating stays a Hold (i.e. Neutral). (To watch Roy’s track record, click here)
Overall, 6 other analysts join Roy on the sidelines, but they are drowned out by 26 Buys, making the consensus view here a Strong Buy. That said, at $307.37, the average target indicates that even many of the bulls think the shares have surged enough for now. (See Nvidia stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.