Nvidia (NVDA): High Expectations Already Baked Into the Stock Price?

MKM's Ruben Roy continues to survey NVDA from the sidelines ahead of this week's first quarter print.


NVIDIA Corporation (NASDAQ:NVDA) could have one more beat and raise come Thursday’s first quarter earnings show. Yet, one sidelined analyst argues that valuation may already have these positive expectations baked into the share price.

MKM analyst Ruben Roy notes that the chip giant’s “pace of positive estimate revisions will likely moderate” and “expectations for continued momentum appear priced in.”

Therefore, the analyst maintains a Neutral rating on NVDA stock with a $245 price target, which implies a slight close to 2% downside from current levels. (To watch Roy’s track record, click here)

Though the analyst anticipates that odds are Gaming segment trends “held up well” in the first quarter, he likewise draws attention to revenue here that rose roughly 36% in fiscal 208 on back of robust crypto-fueled demand generating a slice of these gaming GPU gains. Roy projects 2% of a sequential dip in gaming for the first quarter, which is better than usual seasonality that normally sinks to the mid-teens, as well as 66% year-over-year growth. Some of this strength the analyst attributes short-term to inventory replenishment.

Overall, “Continued positive industry data points and semiconductor peer commentary on data center demand trends suggest that the momentum that NVDA has been seeing in recent quarters in that segment is likely to continue in the near-term. As well, we think that Gaming segment trends held up reasonably well despite concerns over the potential for meaningful declines in crypto related GPU sales. Our estimates for the April and July quarters are modestly above consensus, and we expect another beat and raise coming out of NVDA’s April quarter report. However the pace of revenue beats/raises is likely to slow, in our view, after significant upside to consensus in recent quarters (Jan qtr actual revenue beat consensus by +9%; Apr quarter revenue guidance was +18% versus consensus),” underscores Roy, who continues to be sidelined on the company’s valuation.

TipRanks suggests cautious optimism circles the chip giant when it comes to sell-side analysts’ sentiment. Out of 23 analysts polled in the last 3 months, 15 are bullish on NVDA stock, 6 remain sidelined, while 2 are bearish on the stock. With a return potential of nearly 5%, the stock’s consensus target price stands at $259.95.

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