The disparity is a glaring one. Though the Philadelphia Semiconductor Index (SOX) spent the better part of April pushing further into record-high territory, Nvidia (NASDAQ:NVDA) didn’t. Indeed, NVDA stock, though up firmly since the late-December low, is still miles away from revisiting its October high near $292. Its current price? About $170.
In other words, as the Q4 meltdown was a particularly painful one for shareholders, more than cutting NVDA stock in half, the majority of that loss remains intact.
Nvidia isn’t entirely alone in its laggard ways, to be clear. GPU rival Advanced Micro Devices (NASDAQ:AMD) also hasn’t yet bumped into last year’s peak, and while Intel (NASDAQ:INTC) was able to do so, a tough Q1 report up-ended INTC stock late last month in a pretty big way.
Still, no major tech name has performed as poorly as Nvidia stock, leading to one overarching question: Is NVDA suddenly the weak link the market is making it out to be, or do investors just not get it?
Jefferies seems to suspect it’s the latter, raising its price target to $227 from $185 last month … the highest target among all professional stock handicappers.
The target raise was put in place with no fanfare, and no accompanying commentary. Rather, on April 23, Jefferies just quietly upped its price on Nvidia stock to $227, topping peer analysts.
Investors who’ve closely followed analyst opinions on NVDA aren’t likely surprised. Looking beyond the noise of a wave of downgrades during the fourth quarter of last year, Jefferies is more often than not more bullish on Nvidia than rival researchers. Though none quite rivaled Evercore ISI’s $400 target from early October — right before the meltdown began — Jefferies’ target of $320 around that time was still at the upper end of the scale.
To be sure, the implosion of the cryptocurrency rattled analysts as much as it did investors. Between mid-November and early February, Nvidia stock was downgraded six times.
Even the pros that didn’t waver in their calls still dialed back their price targets. The consensus target of $297 as of September now stands just under $187.
That roster of pros includes Jefferies, by the way, which lowered its target to $246, and then lowered it again to $185 in January. That was also when Jefferies retracted its “franchise pick” label for NVDA stock. Something is clearly changing in the way Jefferies sees Nvidia though, even if the firm hasn’t made clear what it is. The recently upped target, even to a modest $227, confirms it.
How the Game Is Played
It’s admittedly not much to get excited about. Even if NVDA stock makes it to the uppermost target, that’s still won’t recoup the bulk of the Q4 decline.
But, that’s not how the game is played.
It’s rare for a stock to actually meet a consensus target. Rarer still is for a stock to remain at a target price. Analysts, as a community, tend to consistently extend a consensus target and lead a trend … up or down.
Jefferies did this very thing when Nvidia shares were falling late last year, lowering its target to $246 and then $185, following the stock’s demise even though the company’s backstory wasn’t changing that dramatically. Regardless of all the hype it managed to create, cryptocurrency mining was never actually a major game-changer for the company’s bottom line. It was just a fun topic to talk about.
Analysts, whether they could admit it or not, were forced to adjust their opinions and targets to mirror the market’s sentiment.
Now they’re doing it again, but in the opposite direction. With a light at the end of the tunnel starting to shine, a couple of new research houses initiated coverage of NVDA stock with bullish opinions. Others have raised their price target, too. UBS now says the shares are worth $210, up from $180, citing the advent of graphic visualizations being powered by data centers and the potential for its automobile tech.
Still, the rhetoric that could prod Nvidia shares well above their current consensus target remains scant. Jefferies, which is arguably positioned to garner the most attention, hasn’t supplied any fodder to support its target price.
It’s not been afraid to speak up in the past though, offering a glimpse of the discussion it might fuel if-and-when the research outfit sees fit. Like UBS now, Jefferies has cheered Nvidia’s data center opportunities. Analyst Mark Lipacis said as recently as December that Nvidia is still “a top play on secular themes” like artificial intelligence, gaming and self-driving vehicles.
So, What’s Nvidia Stock Worth?
Priced at 26.5 times trailing earnings and 24.6x next year’s projected earnings, Nvidia stock isn’t due any value awards. But, it doesn’t have demonstrate screaming value to get to $227. It only has to hint at growth to draw a bullish crowd again.
That appears to be in the cards, too; not this year, but next. Analysts foresee a 5% dip in revenue for the fiscal year now underway, pushing per-share profits down from last year’s $6.64 to $5.30. Next year’s a different story. Revenue is expected to improve by nearly 20%, driving per-share earnings up from $5.30 to $7.14, a 35% increase.
Yes, that kind of earnings growth can push Nvidia shares up to $227, though odds are good analysts will up that target before NVDA stock is able to get there.
In addition to that, though, the more Nvidia stock makes forward progress, the more vocal Jefferies and other research houses are apt to become, talking up their calls when it looks as they’ll be the right ones. Even analysts are competing with one another to appear to be the “most right.” That chatter alone could propel Nvidia to $227 with very little effort, particularly if results and guidance jibe with the rhetoric.
Welcome to the game.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.