NVIDIA Corp (NVDA)

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Is Nvidia Stock Going to Surge Higher?
By: Market Realist | December 20, 2019

Nvidia (NVDA) stock closed 2.6% higher on December 19 and ended the trading day at $235.46. The stock was trading 0.2% below its 52-week high of $236.00 and 89.2% above its 52-week low of $124.46. At its December 19 closing price, Nvidia’s market cap stood at $144.1 billion. On a year-to-date basis, the stock was up about 76.4%.

NVDA stock was up about 1.5% in today’s trading session at 1:07 PM ET. It also rose in premarket trading.

Why did NVIDIA stock rise?

Earlier today, Wells Fargo analyst Aaron Rakers increased the target price on Nvidia stock to $270 from $240. Rakers reaffirmed the “overweight” rating on the stock.

According to TheFly report on December 20, “The analyst sees Nvidia representing the ‘most significant investor sentiment upside’ driven by his expectation of a “meaningful” reacceleration in data center growth through 2020.”

On Thursday, Nvidia received regulatory approval from the European Union (or EU) antitrust regulator as well as Mexico for its pending acquisition of Mellanox Technologies for $6.8 billion.

According to a Reuters report on December 20, “Nvidia, known for its powerful gaming graphics chips, is looking to boost its data center and artificial intelligence business via the takeover, its biggest deal, to better compete with rival Intel.” The US antitrust regulators have already approved the deal without conditions. However, the acquisition agreement still needs regulatory approval from China.

Nvidia stock’s valuation

Analysts expect Nvidia’s revenues to fall 8.1% in fiscal 2020 (ending January 2020) to $10.8 billion, compared to 20.6% growth in fiscal 2019. Its sales will likely increase by 19.0% in fiscal 2021 to $12.8 billion.

Analysts also expect its adjusted EPS to fall 16.1% in fiscal 2020 compared to 42.8% growth in fiscal 2019. However, its earnings will likely rise by 29.8% in fiscal 2021.

Nvidia stock has a PE ratio of 32.55x and an EV-to-revenue ratio of 10.64x for fiscal 2021.

Analysts’ recommendations and target price

Today, 70.7% of the 41 analysts covering Nvidia stock recommend a “buy,” while 22.0% of the analysts have a “neutral” view. The remaining 7.3% of the analysts recommend a “sell.” The current median target price of $240.00 reflects a potential upside of 1.9% from the closing price of $235.46 on Thursday.

Stock performance

Nvidia closed 7.5%, 12.6%, and 24.1% above its 20-day, 50-day, and 100-day moving averages of $219.01, $209.17, and $189.67, respectively. The stock’s 14-day RSI (relative strength index) score of 76 signified that it was overbought.

Nvidia’s lower, middle, and upper Bollinger Band levels are $201.98, $217.57, and $233.16, respectively. On December 19, it closed near its upper Bollinger Band level, which also suggested that it was overbought.

Nvidia posted better-than-expected earnings results in the third quarter of fiscal 2020, which ended in October. The company’s revenues and adjusted EPS beat Wall Street’s consensus estimates by a significant margin.

Nvidia posted adjusted EPS of $1.78 in the third quarter. The number beat analysts’ consensus expectations of $1.57 per share. The company’s revenue reached $3.0 billion in the third quarter. Its revenue beat analysts’ estimates of $2.9 billion but fell 5.2% year-over-year.

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