Nvidia (NVDA) Is a Great Company, But Is the Stock a Compelling Buy Right Now?

Nvidia (NASDAQ:NVDA) brings a lot of new and exciting things to the table, and its stock has come very far, very fast (up 1817% in the past 5 years), knocking on the door of record highs. With new PC games driving sales of its consumer video cards and data centers snapping up its high powered GPUs, the company has seen strong growth. One area that has been surprisingly slow is the GPUs used by professional digital-content producers. The company is aiming to change that with the announcement of its new Turing architecture for GPUs.

As part of BMO’s 2018 Tech Tour, analyst Ambrish Srivastava met with Nvidia’s management team and noticed there was a lot of focus on the new Turing architecture.

Srivastava wrote, “Now that the RTX20-series cards have been announced, the company’s Turing RTX cards are of great value to gamers vs. Pascal. Ray Tracing appears to be a unique new feature vs. competition and the Pascal cards and enables 6x ray tracing performance vs. Pascal (the GTX10-series). The company also noted that RTX20-series deliver up to 2x gaming performance vs. Pascal if the ray tracing feature is turned off. The company noted that it expects the GM profile of Turing to be similar to Pascal and other gaming product launches.”

The analyst emphasized that the overall tone from Nvidia was very positive and one of confidence.

“We also walked away with the view that NVIDIA’s gaming business is getting a lot less seasonal than in the past given the overall growth of the gaming industry. Additionally, as it relates to Turing for gaming, the company is now taking pre-orders for the product on its own website, which should likely give better visibility into demand. NVIDIA highlighted enhanced ray tracing as a key feature that the company believes opens up additional TAM in its Pro Vis business and offers a key differentiation in its Pro Vis business. The company is also introducing an RTX product line based on Turing architecture for the Pro Visualization business,” the analyst added.

Net net, Nvidia’s stock has put up huge gains, and even though the business still has worthwhile growth potential, its stock isn’t worth owning. At least if you ask Srivastava. The analyst reiterates a Market Perform rating on NVDA, with a price target of $225, which implies a downside of 17% from current levels.

However, if we turn to the Street in general, we can see that the stock has a Buy analyst consensus rating on TipRanks. In the last three months, Nvidia has received 17 Buy ratings vs. 7 Hold rating. These analysts have an average price target on the stock of $291.41, which implies a 7% upside potential from today’s closing price.

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