Top Analyst Lifts Price Target on Nvidia (NVDA); Here’s Why

FBR's Craig Ellis now anticipates 18% in return potential for Nvidia shares on back of not only a strong FQ1 quarterly show, but a slew of catalysts coming this year.


First fiscal quarter 2019 earnings from NVIDIA Corporation (NASDAQ:NVDA) exhibited Thursday night have the best performing analyst on the Street Craig Ellis at FBR out dialing up his already upbeat expectations for this chip giant. Commending big upside for taking Nvidia’s sales and EPS on a substantial upturn, Ellis likewise still spots key drivers ahead that could translate to even more steam.

In reaction, the analyst reiterates a Buy rating on NVDA stock while hiking up the price target from $290 to $300, which implies a close to 18% upside from current levels.

For the first fiscal quarter of 2019, Nvidia yielded a monster outclass, as well as with its surprisingly strong second fiscal quarter guide for 2019. The company’s first fiscal quarter of 2019 outperformed the Street’s expectations by an impressive $315 million and towered $174 million above the Street in its second fiscal quarter guide. Ellis is especially singing Nidia’s praises for achieving this strength in spite of the first quarter’s seasonal weakness and a challenging Data Center comp. Data Center dished out 71% year-over-year growth on back of sustained power in Volta, new DGX systems, as well as HPC design victories. Each one of the company’s four Platform groups trounced the analyst’s first fiscal quarter estimates, and “with record,” approaching the leading gross and operating margins in the industry. However, investors were more keyed into the company’s crypto sales advantage and the second fiscal quarter sales outlook, which while was “sub-seasonal” as anticipated slipped quarter-over-quarter dollars.

Ellis underscores powerhouse strength from Nvidia’s Gaming and Data Center, which pulled off robust upside for the quarter. After all, the company’s rocket-fire 66% year-over-year jump to $3.207 billion in revenue and $1.66 in EPS “crushed” consensus of $2.892 billion and $1.66 in EPS along with the analyst’s forecasts of $2.907 billion and $1.68. As far as the analyst is concerned, stellar long-term gains await “spring loaded” thanks to a plethora of blue-chip U.S., European, and Japanese car and truck OEM alliances.

Glancing ahead to the second fiscal quarter, and not factoring in waning crypto platform growth, the analyst sizes up 3% quarter-over-quarter growth. Sales factor in a $200 million quarter-over-quarter OEM crypto dip. The midpoints of the outlooks point to expectations of $3.100 billion in sales, PF GM of 63.4%, and PF opex of $685 million. Even so, the headline guide shoots past the Street’s $2.936 billion estimate in revenue and $1.64 in EPS, as well as the analyst’s projections angling for $3.046 billion and $1.78.

Bigger picture, “Any Friday pullback will present an attractive entry opportunity, with numerous catalysts coming in CY18 we believe can fuel a further rise in SS estimates. To start, 1Q’s sales were 1,860 bps above T3-year seasonality and while 2Q was 920 bps below, that’s still ~900+ bps of F1H outperformance. While we believe many presume NVDA’s channel has ‘filled,’ our pricing analysis suggests improvement but significant un-satiated demand. As importantly, we suspect Gaming’s poised for a flurry of new products, which could begin to hit around early-June’s Computext. Coupled with enthusiastic responses to Fortnight and PUBG and typical 2H releases, we see potential for sustained F2H Gaming upside. Elsewhere, DC continues to perform well and the DGX-2 launches in F3Q18. Auto is progressing toward longer-term autopilot ramps, so looks spring-loaded for growth. Lastly, stellar financial execution with record 64.7% GM and 44.5% seems sustainable even as we model a modest and in-guidance retreat,” contends Ellis, shining light on a stock he views as “attractive” for investors eyeing large-cap growth.

On back of better sales, the analyst lifts his EPS expectations by $0.60 to $8.10 for 2018, by $0.50 to $9.10 for 2019, by $0.60 to $11.35 for 2020.

Craig Ellis has the strongest TipRanks score on the Street, landing #1 out of a whopping 4,800 analysts with a stellar 82% success rate. Ellis boasts 38.2% in his annual returns. Investors who follow Ellis’ recommendation on NVDA yield an average of 122.0% in profits on the stock.

TipRanks indicates positivity and confidence circles this chip giant when it comes to Street-wide sentiment. Consider that out of 26 analysts polled in the last 3 months, 18 are bullish on NVDA stock while 8 remain sidelined. With a solid return potential of 11%, the stock’s consensus target price stands at $284.48.