The S&P 500 has been depressed for much of this year because of the severe economic fallout from the COVID-19 pandemic. In mid-March the market plunged broadly. But Nvidia Corp. (NASDAQ: NVDA) suffered only the slightest stumble and quickly resumed its steep upward trajectory.
With the company’s share price up nearly 50% this year, is it too late for investors to ride this rocket? Many analysts say the stock is destined to go even higher.
Nvidia is widely considered to be the top semiconductor company in the market. The stock price closed at $350.78 Wednesday. That is nearly 150% higher than its price a year ago. The 52-week range of $141.35 to $367.27 reflects the stock’s stratospheric rise.
Nvidia’s gain over the last 12 months is the second biggest of any S&P 500 stock for the period.
The average 12-month price target is $344.14. Among the analysts’ ratings, 31 say Buy, four say Hold and four say Sell. The average 12-month price target is $344.14.
Praise From Credit Suisse Analyst
Credit Suisse analyst John Pitzer recently set a much higher price target of $425. He praised Nvidia’s new graphics processing unit (GPU), the DGX A100.
“We continue to see NVDA as the best secular growth stock in Semis with an almost open-ended TAM (total addressable market) by first movers advantage and wide/deep moats in both silicon AND software,” Pitzer said.
Nvidia popularized the term GPU in 1999 and has been a leader in its development since that time. Initially used in personal computers as an advance beyond the central processing unit, GPUs are now critical elements of advanced computing and artificial intelligence.
CPUs perform a series of tasks requiring lots of interactivity, Nvidia says. For example, they call up information from a PC hard drive in response to a user’s taps on the keyboard.
“By contrast,” the company says, “GPUs break complex problems into thousands or millions of separate tasks and work them out at once.”
GPUs are critical to gaming, high performance computing, machine learning and driverless car technology.
Strong Performance From Competitor
Semiconductor company Advanced Micro Devices Inc. (NYSE: AMD) has also risen significantly, by about 60% over the last year. That was enough to land chief executive Lisa Su at the top of the list of highest paid CEOs in 2019. But it has not matched the huge gains of Nvidia. The consensus recommendation on AMD is Hold.
Intel Corp. (NASDAQ: INTC) surprised Wall Street in April with a better-than-expected quarterly earnings report. The company earned an adjusted $1.45 a share on sales of $19.8 billion in the March quarter. Analysts expected Intel earnings of $1.28 a share on sales of $18.7 billion.
On a year-over-year basis, Intel earnings rose 63% while sales climbed 23%. It was the company’s fastest earnings growth in more than seven years and the fastest sales growth in at least five years. The first-quarter results marked the second straight quarter of accelerating sales and earnings for the chipmaker.
So the sector is strong, but Nvidia is the breakout performer.
Bank of America analyst Vivek Ayra also believes Nvidia will benefit from booming gaming demand, which has surged during stay-at-home orders because of the COVID-19 pandemic.
Ayra has a price target of $420 for Nvidia.
The Mellanox Acquisition
The market has also looked favorably on Nvidia’s $6.9 billion acquisition of Mellanox. The deal unites two of the world’s leading companies in high-performance computing.
Together, Nvidia’s computing platform and Mellanox’s interconnects power more than 250 of the world’s Top 500 supercomputers. They have as customers every major cloud service provider and computer maker.
With Mellanox, Nvidia will be able to optimize datacenter-scale workloads across the entire computing, networking and storage stack to achieve higher performance, greater use and lower operating cost for customers.
Nvidia chief executive Jensen Huang heads into next week’s annual shareholders meeting in a strong position. The meeting, which will be a “virtual gathering,” may itself be an indication of the future for the company. As more and more businesses take advantage of technology to allow employees to work from home, the semiconductor industry is bound to benefit.
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