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Investors’ and Analysts’ Optimism Pushes Nvidia’s Stock to Record Highs

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Aug. 25 2016, Updated 11:04 a.m. ET

Nvidia and AMD stocks outperform the Market

In this series, we saw that Nvidia’s (NVDA) Pascal GPUs (graphics processing units) have been received well by the market. The company benefited as rival Advanced Micro Devices (AMD) was late by one month in launching its Polaris GPUs.

[marketrealist-chart id=1550496]

Positive revenue growth and strong profits increased investors’ optimism. This was reflected in the company’s share price, which rose by 168% in the past 52 weeks, outperforming Intel’s (INTC) stock, which rose by 20%, and the S&P 500 Index, which rose by 3.9%, in the past 52 weeks.

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Meanwhile, rival AMD’s stock rose by 272% over the past 52 weeks as the company returned from losses to profits and reported its first revenue growth in six quarters. AMD is a more volatile stock with a beta of 2.5. Nvidia and Intel are slightly less volatile than AMD with betas of ~1.3 and ~1.2, respectively. Beta is a measure of volatility, with a level greater than 1 indicating higher volatility and a level less than a indicating lower volatility.

Analysts’ ratings

The strong performance of NVDA stock shifted Wall Street analysts’ ratings more toward “buy” and less toward “hold” in the past three months. This indicates that analysts expect the stock to keep rising and touch new highs.

The stock has a median price target of $68 and is currently trading at a discount of 7.3%. Nvidia could reach this target if the seasonal sales of its new Pascal GPUs grow better than expected and the company meets or beats its fiscal 3Q17 estimates.

Intel’s stock has a median price target of $38 and it is currently trading at a discount of 7.9%. Intel could reach this target if the seasonal sales of PCs and data center pick up and if the rumor of Intel winning the modem business from Apple (AAPL) turns out to be true.

AMD’s stock has a median price target of $5.50 and it is currently trading at a premium of ~18.9%. Analysts are bearish about the stock, while investors are bullish as the company has returned to profits after several quarters of losses.

You can gain exposure in Nvidia by investing in the SPDR S&P 500 ETF (SPY), which has holdings in US equities listed in the S&P 500 Index. It has a 0.17% exposure in NVDA and 0.87% in INTC.

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