Nasdaq NVDA Nvidia

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)

To find good ideas for chip stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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.

With the news headlines saturated by so many heavy impact events, it has almost been forgotten that the earnings season is not over yet.

Next week will see one of 2020’s star performers step up to the plate. Nvidia (NVDA) will report quarterly results on Wednesday, November 18, and avid Street watchers will be keen to find out if the semiconductor giant hit another home run.

So far, Nvidia has had an excellent 2020. The company has been a prime beneficiary of Covid-19 driven secular trends such as gaming and data center, Nvidia’s main bread winners.

Overall, Deutsche Bank analyst Ross Seymore anticipates Nvidia will “deliver a solid beat” and expects both segments to post strong results. The 5-star analyst anticipates 153% year-over-year growth for Datacenter and a 27% year-over-year increase for Gaming, with the two segments making up 41% and 47% of sales, respectively.

In total, Seymore expects Nvidia to report revenue of $4.45 billion, up by 48% from the same period last year and coming in slightly ahead of the Street’s $4.42 billion estimate. The midpoint of Nvidia’s guidance is $4.40 billion.

However, the market has already rewarded the GPU leader handsomely in 2020, with shares up by a massive 126% year-to-date. And this is where the problem lies for Seymore.

With its extra-hot valuation, the analyst cautions investors “against super-bull case scenarios for NVDA fundamentally,” and wonders how much upside there’s left in the tank after such a run up.

“While NVDA continues to hit on all cylinders in an otherwise challenging macro environment,” Seymore said, “We believe much of this goodness is reflected in its share price (~50x CY21E vs SOX at 22x) and at such a valuation fear that an inevitable pause in growth (post SIP/7nm in Gaming, as Cloud digests similar to 2019 etc.) appears to be insufficiently discounted. Consequently, we expect strong execution from NVDA, but retain our Hold rating until a more favorable risk/reward becomes apparent.”

Despite the Hold rating, Seymore’s price target gets a bump and moves from $450 to $500. Still, the new figure represents downside of 7% from current levels. (To watch Seymore’s track record, click here)

Most Street analysts, though, disagree with Seymore. Based on 26 Buys, 4 Holds and 1 Sell, the stock qualifies with a Strong Buy consensus rating. At $582.78, the average price target suggests possible upside of another 9% over the next months. (See Nvidia stock analysis on TipRanks)

To find good ideas for tech stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

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.