Semiconductor giant Nvidia (NVDA) - Get NVIDIA Corporation Report received mixed news from Wedbush analyst Matt Bryson Friday. He raised the stock's price target to $600 from $525, but he took it off Wedbush’s Best Ideas List.
Bryson kept his outperform rating. He likes Nvidia’s fundamentals, not its valuation. So with a target price only about 10% above Nvidia’s current level, he pushed it off the Best Ideas List.
Nvidia recently traded at $539.79, down 0.88%. The stock has jumped 130% year to date.
Bryson likes Nvidia’s strength in gaming and artificial intelligence. Nvidia is likely to report “strong demand (rather than any supply constraints) as the primary factor in ongoing shortages of new consumer GPUs [general processing units],” he said.
Morningstar analyst Abhinav Davuluri expressed enthusiasm for Nvidia, but not its valuation, in a report last month.
“We are raising our fair value estimate for narrow-moat Nvidia to $300 per share,” he wrote. “Should the deal [for ARM from the SoftBank Group] go through, our fair value estimate for the combined company would be $350 per share.”
But, “based on the regulatory risk associated with this deal (the largest in chip history if it closes), we are assigning a 50% probability of the deal closing,” Davuluri said. “If the deal does not close, our standalone fair value estimate for Nvidia would likely remain at $250.”
He believes, “Nvidia is paying a high multiple for ARM’s earnings.” However, “given the GPU leader’s share price is trading at a significant premium to our standalone $250 fair value estimate, we like that Nvidia is using its rich shares to fund a large portion of the deal,” Davuluri said.