Chipmaker Nvidia (NVDA) is enjoying some of the best possible conditions for a chipmaker right now. An ongoing chip shortage means the current stock is inherently more valuable due to its scarcity.
Between a new console generation, a major new graphics card release, and a host of other conditions, Nvidia was poised for a win. Though some new troubles have emerged for the company, it's hard to see how these will do much more than put a ceiling on an already-winning company.
I'm bullish on Nvidia, because conditions are just too good to feel any other way. (See Analysts’ Top Stocks on TipRanks)
Looking at Nvidia's stock charts for the year so far describes a company enjoying not ups and downs, but ups and much faster ups. The company kicked off this year with a solid plateau around $130.
There wasn't a lot of separation in any direction, up or down. February, however, arrived to break the streak. The company broke $150 for the first time this month, but then lost ground with early March. That's when the company's upward trajectory began in earnest. By July, it breached the $200 mark. October took it over the $250 mark. November let it breach $300.
The biggest problem for the company goes back to its plans to buy ARM, the British chipmaker. It's said to be the largest such deal ever struck between chip producers. Regulators, however, aren't happy. European Union regulators took aim at the deal, and other countries are following suit.
The EU's regulators have called a halt to the current investigation as they wait for new information to arrive. However, the U.S. has also stepped in, as the Federal Trade Commission (FTC) filed its own suit against the deal.
Wall Street's TakeTurning to Wall Street, Nvidia has a Strong Buy consensus rating. That's based on 24 Buys and two Holds assigned in the past three months. The average Nvidia price target of $360.17 implies 15.2% upside potential.
Analyst price targets range from a low of $285 per share to a high of $400 per share.
A Limiting Factor, Not a Destructive FactorAs bad as it might sound that regulators are landing on Nvidia with both feet, there's little cause for concern. Remember, the issue at hand here is a planned expansion, not anything Nvidia's doing normally.
Even if the EU, the U.S., or both at once end up putting the kibosh on Nvidia's deal, Nvidia will still be a chipmaker. Better yet, the environment is wonderfully conducive to chipmakers right now.
Anyone who's been trying to buy the newest Xbox or Playstation in the last year knows how hard that's been. Running into shortages in a new console generation's early days is nothing new.
For those shortages to continue over a year after release is unheard of. This illustrates the massive demand for chips out there, particularly graphics chips in gaming.
It's not just about video games, either. Cryptocurrency miners love Nvidia's systems. We all know what the cryptocurrency market has been like for the last couple of years. The first quarter of 2021 alone saw over 700,000 GPUs shipped to crypto miners.
Nvidia ultimately created a line of processors specifically devoted to mining, and included limiting systems on the gaming-focused cards to help space out some of the demand.
So even if the worst-case scenario kicks in — and some believe that's only a matter of time — Nvidia will still be selling pretty much everything it produces as it produces it.
Sure, having another chipmaker under its umbrella would have helped it produce more. The loss of potential gains, however, is much different from actual losses. Nvidia won't lose anything more than what might have been. Oh, and the $2 billion that it had to shell out regardless of how the deal turned out, but that's a cost of doing business.
Concluding ViewsNvidia's deal to buy ARM isn't likely to end well. It's likely to fall through like lead weights through wet tissue paper.
However, this changes little about Nvidia as we know it. It's still got several hot products that customers are lining up to buy. Some have even quit their day jobs just to try and land new Nvidia hardware. It's actually working out better for them than you might think.
That aside, Nvidia is still selling a hot product in a very hot market. The company still has substantial upside potential left to it. The odds of a reversal to the low price targets is pretty remote thanks to the fact that Nvidia's demand isn't really seasonal. Nvidia is looking good right now, even at some of the highest prices seen all year.
Disclosure: At the time of publication, Steve Anderson did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >
Nvidia (NVDA) stock is on fire, rising about 130% on a year-to-date basis and outpacing the Nasdaq composite index. This remarkable growth in Nvidia stock reflects strong demand trends with continued strength in its data center and gaming segments.
While Nvidia is benefitting from strong demand, its stock has witnessed a 10% decline in the last five trading days. The recent weakness stems from concerns that Nvidia’s ARM deal could fail. It’s worth noting that regulators in the U.S., U.K., and China have expressed concerns over competitive issues.
The U.S. Federal Trade Commission recently announced that it has sued to block Nvidia’s ARM acquisition.
Read more: Nvidia and Arm Merger Deal Blocked By FTC on Competition Grounds
Now What?Even with the absence of the ARM deal, Nvidia could continue to gain from the ongoing strength in its data center and gaming divisions.
Highlighting the momentum in Nvidia’s business segments, Vijay Rakesh of Mizuho Securities raised his price target to $335 from $235.
The analyst stated that the DC (data center)/Gaming/Pro-Vis (Professional Visualization) markets are growing fast, and Nvidia’s dominant positioning in the AI (artificial intelligence) is helping to build “a deep competitive moat.” Rakesh maintained a Buy rating on Nvidia stock.
Similarly bullish on Nvidia is Rajvindra Gill of Needham. Gill expects Nvidia to be the “first $1T (trillion) semiconductor company.” The analyst’s bullish outlook reflects Nvidia’s “long-term growth, with the new Omniverse $100B software TAM (total addressable market), coupled with the $100B hardware data center TAM, and the company’s proven, strong FCF generation potential.”
Gill increased his price target to $400 from $245.
Stock RatingAlongside Rakesh and Gill, most Wall Street analysts have a bullish view on Nvidia stock. On TipRanks, Nvidia sports a Strong Buy consensus rating based on 24 Buys and 2 Holds.
TipRanks’ Stock Investors tool indicates that investors have a very positive outlook on Nvidia. The data shows that 4.0% of investors holding portfolios on TipRanks have increased their exposure to Nvidia stock in the last 30 days.
The average Nvidia price target of $360.17 implies 19.9% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >
Nvidia (NVDA) is an American multinational company known for integrated circuit manufacturing. I am bullish on the stock.
The company's facing a significant legal headwind regarding its ARM acquisition, which, if completed would add considerable value to the firm via synergies.
Regardless of whether the deal closes or not, Nvidia stock's prospects remain bright. (See Analysts’ Top Stocks on TipRanks)
MomentumNvidia's a good momentum play at the moment, with the stock trading above its 50-, 100-, and 200-day moving averages. The stock's trading below its 10-day moving average, as the general market has dipped on the news of the Omicron variant.
This might be a good "buy-the-dip" play, as the RSI has drawn down to below 70.
Earnings & OutlookNvidia's Q3 2022 revenue grew by 50.1% year-over-year, beating analyst estimates by $290 million.
Breaking it down by segment, Gaming came in strong across the board with revenue up by 42% year-over-year as RTX and GPU sales formed a cohesive partnership to drive earnings forward. Furthermore, Nvidia's Data Center revenue also reached record numbers with 50% year-over-year growth as a result of strong demand by hyperscale customers for its A100 Tensor core GPU.
Looking ahead, the firm's management expects a strong year-end with Q 4 revenue projected to come in at $7.4 billion and gross margins between 65.3% to 67%. The chipmaker's also sitting with a net deferred tax asset of $745 million, which could be exercised in subsequent earnings periods.
What about the ARM Acquisition?According to Citigroup (C), Nvidia's odds of acquiring ARM group from Softbank have been slashed from 30% to 5%.
The proposed deal was worth $40 billion, which is more than 2x Nvidia's cash and short-term investment holdings. Considering Nvidia already holds a leverage ratio of 49.1%, it will most likely have to issue additional shares to complete the takeover, subsequently diluting shareholder value.
It's unclear whether the deal is going to pan out or not. ARM would add significant value to Nvidia's upstream, and cost synergies would be the result. However, the deal could be strenuous on the balance sheet, and the stock would most likely lose short-term value.
If the acquisition fails, Nvidia stock should sustain its momentum throughout 2022 due to balance sheet factors.
Wall Street's TakeWall Street firms generally think the stock is a Strong Buy. Out of 26 ratings by analysts, 24 have been Buys along with two Holds. The average Nvidia price target is $359.75, which presents 19.8% upside potential.
Concluding ThoughtsNvidia stock is set for upside regardless of the outcome of the ARM acquisition. The company's prospects remain bright after smashing earnings estimates once again.
Disclosure: At the time of publication, Steve Gray Booyens did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >