NVIDIA Corporation (NVDA) Prospects Draw an Even Higher Price Target

RBC Capital's Mitch Steves now spotlights 14% in return potential for NVDA shares.

NVIDIA Corporation (NASDAQ:NVDA) is brandishing powerhouse potential for EPS, with one bull out singing the chip giant’s praises- and with a forecast foretelling of over $12.00 in EPS within the next 2 years.

RBC Capital analyst Mitch Steves highlights tax rate advantages as well as a stronger than anticipated margin expansion stemming from leverage in revenue as reasons he is getting even more confident on the tech player.

In reaction, the analyst reiterates an Outperform rating on NVDA stock while dialing up the price target from $280 to $285, which implies a 14% upside from current levels. (To watch Steves’ track record, click here)

This bull case model sheds light on four key growth catalysts at play: Data Center, gaming, auto, and leverage in NVDA’s model.

Steves continues, “We are raising our price target on Nvidia to reflect 1) new upside case scenario of $12+ in FY21E EPS (CY20), 2) confidence in Data Center spending given positive results across major data center players and continued strong demand for memory, 3) solid gaming results driven by pent up demand and new video games requiring a doubling in size and 4) higher long-term gross margin expectations for Pro Visualization and Gaming. Net Net: we see continued potential for EPS upside driven particularly by DC and Gaming near-term and the new long-term $12 CY20E EPS upside case remains intact (CY20E of $12.00+).”

Remaining enthusiastic on Data Center trends in the grander scheme, the analyst cheers that he sees “no material slowdown” any time soon. There is a deceleration in Data Center approaching 50% by 2020 coupled with better gross margins circling 80%. “Hyperscale spending continues to show up and demand for memory (needed for compute) has been strong,” notes the analyst.

Gaming likewise keeps Steves singing NVDA’s praises for short-term prospects: “The two key drivers for gaming over the next 6 months should be 1) switch revenues remaining strong and 2) core gaming demand remaining solid due to increasing game size (video games becoming more complex and requiring more high end GPUs). Finally, we think VR units could become more material in CY19 if content is created over the next 12-18 months.”

Though the analyst believes gains in auto could rev up to 50% down the line, for the time being, he ops to play it conservatively here. Revenue leverage however is a different story, with the analyst anticipating operating margins could hit 44%- especially if the Data Center segment keeps magnetizing rapid-fire gains.

Ultimately, TipRanks shines light on NVDA as a stock earning bullish attention on the Street. Based on 22 analysts polled in the last 3 months, 12 rate a Buy on the chip giant, 9 maintain a Hold, while 1 issues a Sell on the stock’s opportunity. With a slight return potential of 2%, the stock’s consensus target stands at $253.75.

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