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If you haven’t heard yet, Nvidia Co., Ltd. (NASDASQ:NVDA) had Really 2023 is a good year. From January to December, the semiconductor company’s stock more than tripled. And as of Friday’s close, Nvidia stock was trading at $491, within 3% of its all-time high of $505.48.
Hint: It can be even higher than that.
That’s according to Bank of America analyst Vivek Arya, who released his latest buy recommendation on Nvidia stock on Thursday, pushing Nvidia up another 40% to 700 per share by the end of this year. We predict that it will reach US$. (Click here to see Arya’s track record)
And why does Aria think so? $100 billion in free cash flow, that’s why. NVIDIA stock, currently worth just under $1.2 trillion, is on track to generate an additional $100 billion in positive cash profits over the next two years, Aria said.
When you think about it, this is a pretty surprising claim. The consensus among the 40-odd Wall Street analysts who follow Nvidia is that the company is expected to generate “only” $70 billion from 2024 to 2025, an impressive amount in itself. 30% of that few More money than Aria thinks.
What’s also quite surprising is that Aria doesn’t say much about why she thinks others are wrong about Nvidia, and why she’s right about the $100 billion number, and how she arrives at that number. The fact is that it is not detailed. On the contrary, Arya makes her case. NVIDIA’s “genAI advantage could generate up to $100 billion in increased free cash flow over the next two years” is a more or less in-your-face claim with no supporting math.
Of course, this doesn’t mean that Aria is necessarily wrong. She would like to check again in 12 months. But the lack of evidence in his FCF estimate should probably give investors pause, as this is the underlying assumption upon which the rest of Mr. Arya’s buying thesis is built.
And what exactly is this paper? According to the same analyst, NVIDIA will likely earn his $100 billion over the next two years, of which he will use $30 billion to $35 billion in share buybacks, boosting earnings per share. , it is planned to make it easier for NVIDIA to increase profits. Expected earnings per share growth of 67% in 2024 and 26% in 2025. NVIDIA then plans to use the remaining $65 billion to $70 billion for “organic and inorganic growth initiatives,” reinvestment in the business, and acquisitions of other businesses. , accelerating revenue growth and further accelerating EPS growth.
Aria specifically wants Nvidia to move further into its software and services business where it can generate “more meaningful recurring revenue,” which Aria believes is a weakness in the stock price. The analyst acknowledged that Nvidia is likely to continue expanding in hardware instead, but that the company has invested in some of its own cloud service provider customers, including CoreWeave, Lambda Labs and Vultr. It is pointed out that How increasing these participatory investments will help Nvidia sell more of its hardware products to customers over the next few years, ultimately contributing to recurring revenue growth while increasing sales and profits. It may become.
That is, assuming the $100 billion FCF figure isn’t a complete figment of the analysts’ imagination.
Overall, NVDA stock has a unanimous analyst consensus rating of Strong Buy, a sign of confidence from Wall Street’s analyst population. The average price target is $660.77, implying ~35% growth over the next year. (See NVDA stock price prediction)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. Content is for informational purposes only. It is very important to perform your own analysis before making any investment.
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