Nvidia Stock Soars after Analyst Upgrade

Nvidia (NVDA) stock closed 1.3% higher on December 31 and ended the trading day at $235.30. The stock was trading 2.7% below its 52-week high of $241.81 and 84.3% above its 52-week low of $127.69. At its December 31 closing price, Nvidia’s market cap stood at $144.0 billion. In 2019, the stock climbed about 76.3%.

NVDA stock rose about 1.45% in today’s trading session at 1:10 PM ET. It also rose in premarket trading.

Why did Nvidia stock rise?

On December 31, Benchmark analyst Ruben Roy increased the target price on Nvidia stock to $275 from $240. Roy reaffirmed the “buy” rating on the stock.

According to TheFly, “The analyst noted that he is forecasting revenue and earnings growth of 20% and 34%, respectively, following revenue and earnings declines in a challenging fiscal 2020. Roy expects Nvidia to benefit from a reacceleration of data center spending, coupled with an improving demand environment for GPUs in gaming end markets.”

The report added, “Potential catalysts for Nvidia shares in 2020 include positive bias to estimates on continued data center demand improvement, visibility into its 7nm product road map, and the closing of the pending Mellanox acquisition.”

Nvidia’s financial performance

Nvidia reported adjusted EPS of $3.90 in the first nine months of fiscal 2020 ended in October compared to $5.83 during the same period in fiscal 2019, reflecting a 33.1% YoY (year-over-year) decline. In the third quarter of fiscal 2020, the company posted adjusted EPS of $1.78 compared to $1.84 in the third quarter of fiscal 2019, reflecting a 3.3% YoY decline.

Nvidia reported revenue of $7.8 billion in the first nine months of fiscal 2020 compared to $9.5 billion during the same period in fiscal 2019, reflecting a 17.9% YoY reduction. In the third quarter of fiscal 2020, the company reported revenue of $3.0 billion, a YoY fall of 5.2% and a sequential rise of 16.9%. Its revenue came in above the consensus estimate of $2.9 billion.

Outlook

For the fourth quarter of fiscal 2020, Nvidia expects its sales to grow about 33.8% YoY and reach $2.95 billion, plus or minus 2%. In the fourth quarter of fiscal 2020, the company expects its data center business to improve sequentially. Nvidia expects its non-GAAP gross margins to reach nearly 64.5% in the fourth quarter of fiscal 2020—plus or minus 50 basis points.

In the fourth quarter of fiscal 2020, analysts expect Nvidia’s revenue to rise 34.1% YoY to $2.96 billion. Analysts expect its revenue to fall 8.1% YoY to $10.8 billion in fiscal 2020 ending January. Analysts expect the company to see adjusted EPS growth of 107.5% YoY to $1.66 in the fourth quarter of fiscal 2020. Plus, analysts foresee a fall of 16.1% YoY to $5.57 in fiscal 2020.

According to a December 31 TechRadar report, “The long rumored Nvidia GeForce RTX 2080 Ti Super is expected to rear its head in early 2020, and it’s supposed to be a beast with 4,608 CUDA cores and 16Gbps memory speed.

“That’s not all; the next generation Ampere cards might also arrive in 2020. And, these are expected to utilize 7nm process and double down on ray tracing – not to mention, cut the price so they’re cheaper than ever.”

Analysts’ recommendations and target price

Currently, 29 out of 41 analysts (or 71%) have “buy” recommendations on Nvidia stock. About nine analysts have “hold” recommendations, while three have a “sell.”

Wall Street analysts don’t see much upside in Nvidia stock over the next 12 months. The stock has a target price of $236.32 and a potential upside of 0.4% for the next 12 months.

Technical analysis of Nvidia stock

Nvidia closed 4.4%, 9.6%, and 21.0% above its 20-day, 50-day, and 100-day moving averages of $225.42, $214.64, and $194.48, respectively. The stock’s 14-day RSI (relative strength index) score of 66 signified that it was approaching the overbought zone. Nvidia’s 14-day MACD is 3.09, which denotes an upward trading pattern.

Nvidia’s upper, middle, and lower Bollinger Band levels are $247.97, $225.42, and $202.88, respectively. On December 31, it closed near its middle Bollinger Band level. This value signified that the stock is neither overbought nor oversold.

Read Why Wells Fargo Named Nvidia Stock as a ‘Top Pick’ and Can Nvidia Investors Expect More Upside in the Stock? to learn more. Also, check out Nvidia’s Toughest GPU Competitors and Stock Outlook.