NVIDIA Corporation (NVDA) Stock Weakness Creates Unusually Attractive Opportunity, Says FBR

Nvidia's risks are more than offset by its positives, says FBR's Craig Ellis.


Though NVIDIA Corporation (NASDAQ:NVDA) shares took a beating after its annual GPU Technology Conference and Analyst Day revealed a suspension of its autonomous driving vehicle program, one bull continues to be as confident as ever for the long term.

Not only is FBR analyst Craig Ellis unfazed by yesterday’s sell-off, he wagers this “sharp auto-related stock decline creates [an] enhanced entry opportunity” for investors willing to brave the risk.

As such, the analyst reiterates a Buy rating on NVDA stock with a $290 price target, which implies a 31% upside from current levels. (To watch Ellis’ track record, click here)

On back of Uber’s Tempe, Arizona driving fatality last week from a self-driving vehicle using Nvidia’s technology, Ellis considers the pause on the program a “precautionary step.” The share weakness seems “overly punitive” to the analyst, even as he recognizes a -1.9% dip in the S&P 500 coupled with a -3.9% SOX fallback that probably fueled around one third of Nvidia’s roughly 10% plunge.

Notably, Nvidia will maintain its first tier partner programs while sustaining development of leading edge system, software, as well as tools, even in fact of halting its autonomous vehicle program.

After having anticipated GeForce product launch prospects, though the analyst acknowledges “that did not occur,” he nonetheless stands by revived conviction: “we gained enhanced confidence a new release is likely around 3Q18 with compute-intensive ray-tracing capability. Financially, NVDA’s SAM view rose 3x Y/Y toward $170B+, led by elevated Auto and DC outlooks and substantiated by a slew of new partner engagement and applications. AI momentum is clearly accelerating and a leadership position is fueling robust and broad-based 35% CY17&18 Y/Y growth far above peers, and with GM/OM expansion beyond the 63%/41% that we expect in F1Q.”

In a nutshell, “The stock’s retreat creates an unusually attractive opportunity,” Ellis surmises, asserting that now is a great time to buy on weakness for what is ultimately a compelling stock, near-term and long-term: “We believe estimate risk is minor and the day’s positives meaningfully outweigh negatives and we would accumulate shares given still-attractive short and LT growth potential, and upside to SS FY19&20 estimates.”

TipRanks highlights sentiment shining mostly with optimism over NVDA’s market potential. Out of 24 analysts polled in the last 3 months, 13 are bullish on Nvidia stock, 10 remain sidelined, while 1 is bearish on the stock. With a return potential of nearly 16%, the stock’s consensus target price stands at $254.55.