Piper Sandler maintains NVIDIA stock with $175 target

On Thursday, Piper Sandler reaffirmed its Overweight rating on NVIDIA (NASDAQ:NVDA) stock, holding steady with a $175.00 price target. With a market capitalization of $3.22 trillion, NVIDIA has recently posted a robust first quarter performance and issued strong future guidance, buoyed by the substantial ramp-up of its Blackwell product, which has led to $11 billion in Data Center revenues in the January quarter. According to InvestingPro, NVIDIA maintains a perfect Piotroski Score of 9, indicating exceptional financial strength.

The firm highlighted NVIDIA’s current situation, where demand for Blackwell is extremely high, to the extent that they expect the company to be sold out for the entire calendar year 2025. NVIDIA is also expanding its client base, currently working with several customers that have 100k cluster systems, which is anticipated to contribute to growth for multiple quarters ahead.

One area of concern noted by Piper Sandler was NVIDIA’s gross margin, which is projected to be around 71% for January. This figure is below the company’s usual performance due to the accelerated efforts to meet the high demand for Blackwell. However, gross margins are expected to rebound to mid-70s percentages towards the end of the year, aligning with the company’s impressive trailing twelve-month gross profit margin of 75.86%. InvestingPro data shows 18 additional key metrics and insights about NVIDIA’s profitability and growth potential.

Despite these challenges, Piper Sandler has made a slight upward revision to their revenue forecast for NVIDIA. On the other hand, the firm has adjusted its earnings per share (EPS) forecast downward, factoring in the near-term headwinds from gross margin and tax considerations.

In conclusion, Piper Sandler reiterated its Overweight rating and expressed a strong conviction in NVIDIA’s stock, especially during the period of Blackwell’s ramp-up, describing the stock as a "must own" during this phase. This aligns with the broader Wall Street sentiment, as InvestingPro data reveals a strong analyst consensus with price targets ranging from $120 to $220, and projected revenue growth of 112% for fiscal year 2025.

In other recent news, NVIDIA reported significant financial results, with its fourth-quarter sales for January and first-quarter sales for April exceeding Wall Street’s expectations by $1.2 billion and $1 billion, respectively. The company’s Data Center revenue was particularly strong, with a 16% increase from the previous quarter and a 93% rise year-over-year, driven by the successful ramp-up of the Blackwell platform. Despite this, NVIDIA’s gross margin for the first quarter was reported at 71%, slightly lower than anticipated, due to the initial costs associated with the Blackwell ramp-up. Management anticipates a return to mid-70s gross margins by the end of 2025.

Analysts have varied perspectives on NVIDIA’s future. Evercore ISI and KeyBanc both maintain an Outperform and Overweight rating, respectively, with a $190 price target, citing the company’s strong performance and demand outlook. TD Cowen also reiterates a Buy rating with a $175 target, highlighting NVIDIA’s strategic advantage in accelerated computing. Oppenheimer maintains an Outperform rating with a $175 target, recognizing NVIDIA’s strong position in the AI industry. Conversely, DA Davidson holds a Neutral stance with a $135 target, pointing to mixed financial outcomes and concerns over gross margin guidance. These recent developments indicate a complex financial landscape for NVIDIA, with analysts expressing both optimism and caution.

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