“We are lowering estimates,” is currently a phrase getting overused by Wall Street investment firms. COVID-19’s reorganization of the market has necessitated readjustments of previous models for a plethora of companies. So, here’s a rarity in these times.
5-star Susquehanna analyst Christopher Rolland reiterated a Positive rating on Nvidia (NVDA), while raising the price target from $320 to $330, which implies potential upside of 25% from current levels. (To watch Rolland’s track record, click here)
The GPU leader’s exemplary balance sheet and growth drivers are the reasons why in today’s uncertain climate, its share price is firmly in the green in 2020. To note, NVDA stock is up by 16% year-to-date.
Rolland’s positive assessment comes off the back of a recent check in Asia on the state of Nvidia’s supply chain and how it affects the timing of future 7nm product launches.
“Our quick takeaway is that enterprise demand remains strong and supply constraints have (basically) been alleviated. Checks indicate work-from-home and enterprise/cloud demand are helping overall demand,” the 5-star analyst said.
Following the Chinese lockdown’s halt on production, it appears the supply chain is up to roughly 80% capacity with the promise of all delayed orders being fulfilled by April. However, at Nvidia new products will most likely be pushed back to later in the year, as the company has stated “the time isn’t right” for new announcements.
But the delays haven’t dampened Rolland’s outlook, as the checks have uncovered additional good news.
Rolland said, “We also learned that a Korean telco carrier is making a strong push for 5G AI inference services based on GPU infrastructure, leading to sales for DGX-2 and T4 systems. Finally, we note Microsoft’s DirectX 12 Ultimate announcement in mid-March should increase ecosystem adoption of ray-tracing and play right into NVIDIA’s hands. While the timing of new 7nm launches isn’t quite certain, we view checks as largely positive.”
All in all, the Street agrees with the Susquehanna analyst. Nvidia’s Strong Buy consensus rating is based on 27 Buys, 2 holds and 1 Sell rating. The potential upside comes in at nearly 16%, should the average price target of $304.76 be met in the coming months. (See Nvidia stock analysis on TipRanks)