Semiconductor stocks have enjoyed a bountiful 2020. The industry’s overall barometer, the SOX (the PHLX Semiconductor Index) has added 38% year-to-date, easily outgunning the S&P 500’s 12% returns. The sector has been led by several outperformers, among them Nvidia (NVDA).
Heading into Wednesday’s FQ3 earnings, the GPU leader boasts year-to-date gains of a massive 128%, as the company has taken full advantage of the Covid-19 driven trends.
Ahead of the print, Rosneblatt analyst Hans Mosesmann expects Nvidia to post some eye-catching numbers.
“We are looking for the company to post a beat and raise to our/consensus estimates for both the October ending quarter and January outlook,” the 5-star analyst said.
The analyst added, “We see Nvidia benefiting from key themes/trends over the next few quarters/years, including a multi-year data center GPU compute cycle, the transition to a"soft" IP company, and a product shift to the data center in the near-term and increasing and recurring software sales from automotive in the long-term.”
Nvidia’s success has been driven by the outstanding performance of its two main segments – Gaming and Data Center. Mosesmann expects Gaming revenue to increase by “high-20s% q/q,” boosted by PCs “remaining the largest entertainment platform and the continued adoption of RTX.”
The analyst also believes the launch of new consoles during the holiday season will prove to be an additional catalyst.
Nvidia’s other high-flying segment - Data Center – is also expected to post strong results. Mosesmann anticipates “low to mid-single-digits q/q growth,” based on “strong traction from Ampere,” and a continuation of the WFH tailwind.
While Gaming and Data Center are traditionally Nvidia’s main breadwinners, the next few years could see a third segment coming to the fore. After a difficult 1H20 severely affected by Covid-19, Mosesmann expects Nvidia’s Automotive segment to post a recovery, coming in “flat to slightly up q/q,” with further recovery in the January quarter.
Accordingly, Mosesmann rates NVDA shares a Buy along with a $600 price target, which implies a 12% upside from current levels. (To watch Mosesmann’s track record, click here)
Amongst Mosesmann’s colleagues, there are plenty supporting his bullish thesis. NVDA's Strong Buy consensus rating is based on a resounding 26 Buys vs. 4 Holds and 1 Sell. At $584.63, the average price target suggests upside of ~9% in the year ahead. (See Nvidia stock analysis 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.