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NVIDIA (NASDAQ:NVDA) has been riding a wave of euphoria lately, buoyed by an increase in hyperscale demand and the growing ubiquity of cloud-based solutions amid spatial distancing measures instituted to dampen the spread of the coronavirus (COVID-19) pandemic. Consequently, as NVIDIA gears up to report its Q1 2021 earnings on the 21st of May, financial analysts have been expressing bullish opinions regarding the company’s prospects.
Today, BMO Capital (TSE:BMO) analyst Ambrish Srivasta raised NVIDIA’s stock price target by a whopping 49.12 percent to $425 from $285, translating to an upside potential of 21.76 percent relative to the current price of $349.04, as of 10:52 a.m. ET. The analyst observed in his investment note:
“While no one single event drives the change in thinking, the company's continued execution on the datacenter side, along with the latest product rollout, warrants a more positive stance on the shares.”
Srivasta went on to comment that:
"[NVIDIA is] uniquely positioned to continue to benefit from a massive shift in the compute landscape.”
Moreover, according to the BMO analyst, NVIDIA can “grow its datacenter business to at least a $20B annual run rate versus the $4.8B for this year.” Consequently, the analyst believes that the company can grow its EPS to a whopping $20 per share over the long-term.
NVIDIA’s upcoming earnings announcement continues to spur analyst upgrades. As a case in point, Deutsche Bank (ETR:DBK) analyst Ross Seymore raised NVIDIA’s stock price target today to $300 from $290 while retaining a ‘Hold’ rating for the stock. Seymore believes:
“[NVIDIA’s reported earnings and guidance] would be strong in normal times, and likely even more impressive in light of the current pandemic."
Consequently, the analyst increased his long-term EPS estimate to $9 per share, reflecting the impact of Mellanox’s acquisition that “could be as much as 5%-8% accretive to earnings” for NVIDIA.
For Q1 2021, Zacks consensus estimate for NVIDIA’s revenue is currently pinned at $2.99 billion, translating to year-over-year growth of 34.9 percent.
(All figures are in billions of dollars)
Similarly, Zacks consensus EPS estimate is currently pegged at $1.69, alluding to a year-over-year increase of 92.1 percent. Bear in mind that NVIDIA has beaten consensus EPS estimates in all four previous quarters, surpassing the expectations by an average of 10.6 percent.
(All figures are in dollars)
Apart from the strength in hyperscale and cloud spheres, NVIDIA is expected to have benefited from a number of AAA gaming titles that now support its RTX Ray Tracing technology. Moreover, the GeForce RTX SUPER GPUs are also expected to have boosted the company’s top-line metric. However, sales channel disruptions due to the coronavirus-induced lockdowns may have moderated some of these gains. In addition, NVIDIA’s automotive segment is expected to have taken a hit during the quarter.
Even as a plethora of companies curtailed their expenditures amid the ongoing macroeconomic weakness, NVIDIA chose to maintain its recent acquisition spree. For example, the company officially completed its acquisition of Israel’s Mellanox Technologies on the 27th of April, capping an arduous process that spanned over 13 months. Moreover, on the 4th of May, NVIDIA declared that it was buying the open networking software company, Cumulus Networks, for an undisclosed amount.
Year to date, NVIDIA’s stock has generated returns of 44.34 percent, corresponding to a market capitalization of $206.83 billion. For comparison, the broader S&P 500 index has generated a return of -8.67 percent during the same timeframe.