The investing frenzy over artificial intelligence showed no signs of stopping after blowout earnings and guidance from Nvidia.
Nvidia
(ticker: NVDA) stock had already tripled this year by Wednesday’s close, but the group’s latest earnings propelled the shares another 6.5% to an intraday record high Thursday. While shares retreated, hung onto some gains, closing up 0.1% to $471.63—less than 1% from their all-time closing high of $474.94.
The market cap of Nvidia topped $1.2 trillion as of Thursday—a remarkable rise from the start of the year, when the company’s value was below $370 billion. Nvidia is closing in on
Amazon’s
(AMZN) $1.4 trillion value and
Alphabet’s
$1.7 trillion mark, though
Apple
(AAPL), the world’s most valuable company with a market cap above $2.8 trillion, is further away.
If you believe Wall Street, these milestone market caps held by Big Tech peers could soon be claimed by the chip maker.
Nvidia stock has an average target price among analysts surveyed by FactSet of $574.40, though that could rise because more brokers are likely to update their financial forecasts now that the earnings are out. This average price target implies a gain of almost 22% for Nvidia’s stock price, as of the Thursday closing level, which would translate to its market cap climbing to around $1.42 billion.
That would make the company more valuable than Amazon at its current level and put it within spitting distance of Alphabet. And there is reason to believe Nvidia could continue to outperform. After all, two consecutive quarters of vastly outperforming Wall Street’s expectations have been a significant factor pushing Nvidia stock higher.
If there is one takeaway from the chip maker’s performance so far in 2023, it is that no one should be surprised if Nvidia turns in better results than anticipated. There is at least one Nvidia mega-bull who sees the company’s market cap climbing above that of Apple at the iPhone maker’s current value.
Chaim Siegel, an analyst at Elazar Advisors, has a $1,606 price target on Nvidia stock, implying the shares will gain 220% from Thursday’s opening level. That would propel the group to a market cap just shy of $4 trillion—a milestone no company has ever reached.
Siegel’s estimate is striking, but perhaps not outlandish. Here’s the math that backs up Nvidia stock at more than $1,600 with a market cap dwarfing Apple’s.
Nvidia’s data-center revenue—which includes the AI business—grew to $9.2 billion in the second quarter from $4.3 billion in the first quarter. Analysts surveyed by FactSet expect the group to report data-center sales of $11.1 billion in the third quarter, which would mark a slowdown in growth after a big acceleration. Siegel is far more bullish, seeing it as unlikely that a slowdown is coming, especially because the company has seen demand accelerating.
Siegel arrives at his target based on what he thinks investors will be willing to pay for the earnings Nvidia will deliver next year.
While analysts surveyed by FactSet expect Nvidia to earn $10.42 a share in 2024, Siegel has that number at $35.69. Nvidia was trading at 35 times next year’s earnings on Thursday, according to FactSet data, but Siegel uses a valuation of 45 times, which is closer to where the stock has been in recent weeks. It was at 43 times before the results on Wednesday. Forty-five multiplied by $35.69 is just above $1,606, Siegel’s target.
“And I think I’m too conservative,” Siegel wrote in a note. “These numbers are so big that I don’t know what to do.”
It should all help Nvidia bulls riding the earnings high keep the party going.
Write to Jack Denton at [email protected]
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