Nvidia Price Target Raised by Piper Sandler on Mellanox Deal Optimism

Analysts raised their price target on Nvidia to $350 citing the completed acquisition of Mellanox as a strong positive for the stock.
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With Nvidia’s  (NVDA) - Get Report acquisition of Mellanox finally complete, analysts at Piper Sandler are significantly increasing their revenue and earnings estimates for the chipmaker. As a result, they raised their price target on Nvidia from $330 to $350 and maintained their overweight rating on the stock.

“We think the combination of NVDA and Mellanox brings the combined company multiple steps closer to being a complete provider of connectivity solutions, while on the verge of being a very vital player in compute,” analyst Harsh Kumar wrote on Thursday.

Nvidia shares rose 1.9% to $303.30 on Thursday morning and are up about 30% so far this year.

Kumar wrote that he thinks there is a chance Nvidia beats its original April quarter guidance when it reports earnings on May 21, based on the strong performance of the company's data center and PC segments despite the coronavirus headwinds.

In gaming, which makes up about 50% of Nvidia's revenues, Kumar is now expecting a 10% decline in the April quarter versus his previous expectation of a 12% decline, based on several factors that could drive upside. These factors include stay-at-home orders falling squarely in the April quarter, and working and learning from home likely prompting laptop and gaming card sales. Possible downside is the uncertain economy impacting consumer demand, however. 

Mellanox designs and develops Ethernet and InfiniBand interconnect solutions that target the high performance compute and enterprise data center markets. Nvidia’s $6.9 billion acquisition of Mellanox closed on April 27. 

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