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Can NVIDIA (NVDA) Stock Breach the $200 Mark in Near Future?

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Given the recent optimism surrounding NVIDIA Corporation (NVDA - Free Report) , it is just a matter of few days that the stock will gain another $13 and breach the $200 mark. The stock closed trading at $187.55 yesterday.

Shares of NVIDIA have gained a whopping 75.7% year to date (YTD). If you still haven’t taken advantage of this appreciation yet, then this is the right time to add the stock to your portfolio. Notably, NVIDIA has substantially outperformed the industry to which it belongs to, which has gained 24.1% YTD.

Raised Target Price Boosts Share Price

The stock hit new highs, back to back, over the last two trading days. This upswing came after two major investment firms raised the target price and commented that the company’s prospects look promising. The firms further noted that the stock is poised to carry this bullish momentum ahead, in turn boosting its share price.

The stock first scaled a 52-week high of $180.11 last Friday, after investment firm Evercore ISI’s analyst, C.J. Muse, reiterated his outperform rating on the stock and raised the target price to $250 — approximately 48% higher than the previous day’s closing price of $169.40.

On the very next trading day, i.e. Monday, NVIDIA crafted its all-time high of $191.20 after Bank of America Merrill Lynch’s analyst — Vivek Arya — raised its target price to $210, which is again nearly 17% higher than Friday’s closing price.

What’s Raising the Optimism?

Both analysts believe NVIDIA will dominate the Artificial Intelligence (AI) chip market in the near future, similar to its performance in the gaming and data center markets.

Arya of Bank of America Merrill Lynch wrote in a note to clients, “Our positive view on Nvidia is based on its underappreciated transformation from a traditional PC graphics chip vendor, into a supplier into high end gaming, enterprise graphics, cloud, accelerated computing and automotive markets.” He further added, “Similar to other large successful tech industries, we expect the $30bn AI chip market to also feature one dominant supplier – we think NVDA.”

Evercore ISI’s Muse shares a similar view and believes NVIDIA is building “the industry standard” in artificial intelligence computing, which “will be nearly impossible to replicate.” He further added that the company is well poised to get the “first-mover advantage” and will continue maintaning its sturdy presence in the AI training system.

Bottom Line

NVIDIA remains one of the best performers in the semiconductor space. Given the accelerated momentum in gaming, datacenter and automotive technology, we believe this Zacks Rank #1 (Strong Buy) stock, with a long-term EPS growth estimate of 10.3%, will continue to rally in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.

Many might argue that NVIDIA, with its hefty forward P/E valuation of 52.1x compared with the industry average of 18.2x, is a risky bet. Nevertheless, we beg to differ as high valuations and increasing share prices do not necessarily imply that the stock does not have much upside potential left.

NVIDIA has grabbed attention with striking performances on the back of solid earnings results and strong growth projections.

Furthermore, with its consistent efforts toward attaining robust position in several emerging industries such as AI, deep learning and driverless cars industry, NVIDIA has outpaced other competitors in the space such as Advanced Micro Devices (AMD - Free Report) , Intel Corp. (INTC - Free Report) and STMicroelectronics (STM - Free Report) , in terms of growth.

Therefore, we believe investing in this stock will yield promising returns for your portfolio in the short term.

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