Nvidia Analyst Sees 42% Upside To Stock With 2nd Price Target Boost This Week After Stellar Q2

Nvidia Corp.'s (NASDAQ:NVDA) stock received a price target boost, potentially the first of many to follow, after the company exceeded the most optimistic of Wall Street forecasts for the second quarter.

The Nvidia Analyst: KeyBanc Capital Markets analyst John Vinh maintained an Overweight rating on Nvidia shares and raised the price target from $620 to $670, suggesting over 42% upside from current levels.

The price target hike represented a back-to-back revision as the firm earlier this week increased the price target from $550 to $620.

The Nvidia Thesis: Nvidia's Data Center revenues jumped over 170% year-over-over to a record $10.32 billion in the second quarter and is on track to increase by 230% to $12.7 billion in the third quarter, KeyBanc's Vinh said. The segment benefited from accelerating generative AI trends, the analyst said.

The strength reflected firming demand from cloud service providers, consumer internet companies, and enterprise customers, he said.

Within the segment, Data Center compute revenue nearly tripled, thanks to strong demand for its HGX platform GPU board from CSPs and large consumer internet companies, the analyst said. Networking revenues almost doubled, driven by InfiniBand, he added.

The analyst noted that the U.S. was the strongest performer, while China’s demand held within the historical norm of 20-25% despite the ban threats.

Nvidia signaled that visibility extends into 2024, prompting it to seek additional suppliers, Vinh noted. The company plans to increase supply each quarter through next year to meet demand, he added.

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Gaming revenue, the analyst said, came in at $2.49 billion, below his $2.60 billion estimate, although end customer demand was consistent with seasonality.

The ramp-up of Ada platforms helped professional visualization businesses to report revenue of $379 billion, ahead of KeyBanc's estimate, he said. That said, weak China demand weighed on the automotive segment, as revenue came in at $253 million, below the firm's estimate of $302 million, he added.

As such, Vinh raised his earnings per share estimates for the third and fourth quarters from $3 and $3.33, respectively, to $3.35 and $3.72. Revenue estimates for these quarters go up from $14.75 billion and $16.33 billion, respectively, to $16.12 billion and $17.66 billion.

Nvidia Price Action: Nvidia rose 6.58% to $502.15 in after-hours trading on Wednesday following the earnings announcement, according to Benzinga Pro data.

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