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NVIDIA Corporation (NVDA) Stock Has Excessively Discounted Risk Factor of AV Program Suspension, Says Top Analyst

Craig Ellis makes a bullish case on Nvidia's prospects amid its Global GPU conference.


FBR’s top analyst Craig Ellis is out sharing his key insights amid the NVIDIA Corporation (NASDAQ:NVDA) Global GPU conference.

Not only did the company unleash buzz regarding various Gaming, Data Center, Pro Visualizing product, software, and systems reveals, but the semiconductor giant likewise tackled the transportation arena- specifically, last week’s fatality in Arizona that put a dark overcast cloud over self-driving technology.

Nonetheless, the analyst highlights dedication from the NVDA team to keep working on autonomous vehicles. In fact, Nvidia wagers autonomous vehicles (AVs) down the line will prove to be substantially safer than even humans driving vehicles- and as such, the company is steadfast in pursuing its artificial intelligence (AI) work.

For now, the company has suspended its autonomous car testing of its own cars on public roads; Ellis says this is with hopes of gaining new light following the Uber accident. Keep in mind, this program could have a range of around 10 to 20 vehicles, and the suspension only applies here- not to Nvidia’s various additional Tier-1 partner programs, points out the analyst.

When the press was reporting a media hailstorm regarding the suspension, Ellis defends Nvidia: “We believe this point was not clear in press reporting.” Moreover, the analyst underscores a worldwide fleet of manually driven data collection cars that likewise are safe from operational suspension. Ellis adds, “NVDA had previously announced an Uber partnership at CES 2018. It is unclear to us how and to what extent NVDA’s technology was used in the AZ vehicle.”

Overall, “We acknowledge that the AV program suspension has negatively impacted sentiment and could ultimately carry estimate risk,” writes Ellis, but in the grander scheme: “we believe a ‘pause, analyze, learn, and correct’ approach is prudent in the aforementioned AZ situation and believe this will ultimately be recognized as an appropriate approach by investors, which will ultimately help restore sentiment. So, while we can’t rule out estimate risk, we do believe the stock has overly discounted the impact of revenue and reputation risk.”

As such, the analyst reiterates a Buy rating on NVDA with a $290 price target, which implies a 30% upside from current levels. Ellis is one of NVIDIA’s biggest bulls, and he is also one of the top analysts rated who cover the stock.

TipRanks indicates a mostly bullish analyst consensus rooting for Nvidia’s success. Consider that out of 25 analysts polled in the last 3 months, 15 are bullish on NVDA stock, 9 remain sidelined, while 1 is bearish on the stock. With a return potential of nearly 15%, the stock’s consensus target price stands at $256.82.