Looking for a reason to buy shares of Nvidia (NASDAQ:NVDA)? How about three reasons, courtesy of FBN Securities analyst Shebly Seyrafi. Seyrafi initiated coverage of Nvidia’s stock with a Buy rating and price target of $300, which implies an upside of 24% from current levels. The analyst highlighted three factors to support his bullish stance:
- Strong Growth in Datacenter Segment – NVDA is one of the few plays on artificial intelligence and machine learning, key trends which are beginning to take off. NVDA launched its CUDA framework in 2006, and CUDA (Compute Unified Device Architecture) has since become the dominant framework for GPU computing. GPU-accelerated computing is the use of a graphics processing unit (GPU) with a central processing unit (CPU) to accelerate deep learning, analytics, and engineering applications.
- Strong Position in Gaming GPUs – Although gaming declined from 59% of revenue in F2017 to 57% in F2018, gaming still grew by a strong 36% Y/Y in F2018 driven by strong unit growth and (we estimate) double-digit ASP increases. There are currently over 2B gamers in the world, and the percentage of gamers over 35 (so with the financial wherewithal) has grown from less than 25% in 2003 to right below half of the market today.
- Good Play on the Strong Growth of Autonomous Cars – IHS Markit forecasts that the number of autonomous cars worldwide is expected to reach 30-40M by 2040, and NVDA sees its AI car opportunity growing to $8B by 2025 with the largest revenue opportunity ($5B) coming AI Level 4/Level 5 self-driving cars.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Shebly Seyrafi has a yearly average return of 7.5% and a 60% success rate. Seyrafi is ranked #621 out of 4824 analysts.
The Street largely seems to echo Seyrafi’s positive sentiment, considering TipRanks analytics showcase NVDA as a Buy. Out of 25 analysts polled in the last 3 months, 18 are bullish on Nvidia stock, while 7 remain sidelined. With a potential upside of nearly 21%, the stock’s consensus target price stands at $292.