Amidst optimistic analyst ratings, robust financial performance, and Nvidia’s stock surge of 240% in 2023, fund managers are debating when to make investments.
TakeAway Points:
- Analysts predicted an optimistic average price target of $1004.89, implying a nearly 12% upside, for Nvidia’s shares, which surged 240% in 2023.
- Fund managers have differing opinions: Adam Coons suggests caution owing to possible overvaluation, while Trent Masters supports buying despite the increase.
- For the fiscal year 2024, Nvidia’s revenue increased by 265%, demonstrating its leadership in the market and innovation in the AI chip space.
Experts are optimistic about Nvidia
Leading semiconductor manufacturer Nvidia has had a remarkable 240% growth in share price in 2023, with a more than 80% increase year-to-date. The stock is still quite popular with analysts and investors, despite a recent plateau.
Out of the 59 analysts that cover Nvidia, 52 have recommended it as a buy or overweight, while 7 advise holding the stock, according to FactSet data. Analysts have given an average price target of $1004.89, which represents a potential upside of approximately 12%. This optimistic forecast highlights how much the market believes in Nvidia’s capabilities and future potential.
Fund Managers Hold Differing Opinions
As per the report, an investor-led discussion over when to buy in Nvidia has arisen due to the company’s spectacular surge in stock price. Even with the substantial increase in value, Alphinity Investment Management portfolio manager Trent Masters recommends purchasing Nvidia stock. As evidence of its progress, he points to the company’s four-fold increase in earnings to $29 per share.
Although Masters notes that buying a company following a significant run-up might be challenging, he also stresses the significance of making an unbiased appraisal. He is primarily worried about the long-term possibility of losing market share to rivals like Advanced Micro Devices. Nvidia’s robust product demand, commanding market share in GPUs, and steady earnings, however, keep him upbeat.
“I personally missed the initial run in Nvidia and only bought the stock when it rose to $390 last May after its results. It’s probably one of the hardest things I’ve done in the last 10 years to buy a stock that’s already up so much because it feels like you could be making a mistake. But I think investors just have to view these things objectively… We’ve already seen a four-fold expansion in its earnings to $29 per share, which is something we’ve not seen before.” Masters said.
On the other hand, Adam Coons from Winthop Investment Management cautions that Nvidia’s valuation might be exaggerated due to its recent sharp increase. Coons has been cutting back on his Nvidia holdings while he waits for the company’s valuation to stabilise.
He suggests concentrating on indicators like the price-to-earnings ratio and the creation of new income sources. He thinks the current stock price might be justified if the annualised sales growth rate over the next five years approaches 50%. Although he takes a cautious approach, Coons is still upbeat about Nvidia’s long-term prospects and stresses the importance of exercising caution in the near term owing to possible volatility.
“Nvidia is a company that ran too far too fast. We’ve been holding Nvidia through the rally, but we’ve started to sell because the current valuations are inflated. Long-term, it is definitely a company or a stock you want to own. I just think you need to be careful in the short term around some higher volatility and some bigger swings.” Coons said.
The Financial Results of Nvidia
According to the report, Nvidia has demonstrated exceptional financial achievement; their fiscal year 2024 total revenue increased by 265% over the previous year. The company’s impressive growth can be attributed to its dominant market position and adeptness at leveraging product demand. Nvidia’s success has been largely attributed to its dominance—often referred to as a monopoly—in the AI chipmaker market. Investors are interested in the company and confident in its growth trajectory due to its capacity to innovate and broaden its product offerings.
