On Thursday, a Craig-Hallum analyst increased the price target for NVIDIA (NASDAQ: NASDAQ:NVDA) shares to $175 from the previous $165, while maintaining a Buy rating. The adjustment follows NVIDIA's guidance on January 25, which did not provide the upside some investors had anticipated. The analyst noted that gross margin (GM) outlook for the upcoming quarters presents a challenge that might impact the stock's performance today. Despite this, the firm recommends purchasing shares during this period of weakness.
The analyst believes that the effects on NVIDIA's stock are short-term, lasting for one to two quarters, and expects the company's Blackwell architecture to contribute positively to sales, gross margins, and earnings per share (EPS) in the future. The firm remains optimistic about NVIDIA's prospects, citing the company's strong position in the supply chain and software ecosystem, which discourages significant shifts away from NVIDIA's offerings in the near term.
According to the analyst, NVIDIA's role in the industry is secure due to the absence of significant impact from both merchant and in-house accelerators. They argue that NVIDIA's ecosystem is likely to remain dominant for at least the next few quarters. The firm also points to NVIDIA's consistent one-year cadence of releasing hardware improvements and its comprehensive system offerings as reasons to maintain confidence in the company's market position.
The analyst reiterated their Buy rating for NVIDIA and expressed confidence in the company's ability to navigate the current headwinds. The new price target of $175 reflects the firm's assessment of NVIDIA's resilience and potential for growth despite the near-term challenges. The firm's outlook remains positive, anticipating that NVIDIA will continue to lead in its field without a major shift in the competitive landscape.
In other recent news, NVIDIA has been making strides with its financial performance and strategic advancements. The company reported a record-breaking total revenue of $35.1 billion, exceeding expectations. The revenue outlook for the next quarter is estimated at $37.5 billion. Notably, the company's Blackwell chips are expected to significantly contribute to revenue streams, with production shipments expected to ramp up in the fourth quarter.
Analysts from firms such as DA Davidson, Itau BBA, William Blair, Rosenblatt Securities, and Cantor Fitzgerald have updated their stances on NVIDIA. DA Davidson increased the price target to $135, while Itau BBA maintained an Outperform rating with a steady price target of $164.00. Rosenblatt Securities increased its price target to $220, and Cantor Fitzgerald reiterated an Overweight rating with a $175.00 price target.
Despite potential short-term pressure on gross margins due to the initial ramp-up of the Blackwell product, margins are expected to rebound in the second half, returning to the mid-70% level. High demand for Blackwell is anticipated to outstrip supply for several quarters due to supply limitations.
InvestingPro Insights
NVIDIA's recent performance and future prospects align with several key metrics and insights from InvestingPro. The company's market capitalization stands at an impressive $3.57 trillion, reflecting its dominant position in the semiconductor industry. NVIDIA's revenue growth is particularly noteworthy, with a staggering 194.69% increase over the last twelve months, supporting the analyst's optimistic outlook on the company's future sales potential.
InvestingPro Tips highlight NVIDIA's strong financial health and market position. The company boasts a perfect Piotroski Score of 9, indicating robust financial strength. This aligns with the analyst's confidence in NVIDIA's ability to navigate short-term challenges. Additionally, NVIDIA's impressive gross profit margins, which stand at 75.98% for the last twelve months, underscore its operational efficiency and pricing power in the market.
It's worth noting that NVIDIA is trading near its 52-week high, with its current price at 97.41% of the peak. This reflects the market's continued confidence in the company's prospects, despite the analyst's concerns about short-term gross margin challenges.
For investors seeking more comprehensive analysis, InvestingPro offers 22 additional tips for NVIDIA, providing a deeper understanding of the company's financial health and market position.
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