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Semiconductor companies benefiting from the current artificial intelligence boom Nvidia (NASDAQ:NVDA) was probably the hottest stock on Wall Street in 2023. Even more surprising, 2024 is off to an equally explosive start. At the time of writing, the stock is up more than 55% year-to-date, helped by a big rally this week when the company reported a 265% year-over-year increase in fiscal fourth-quarter sales.
But here’s the crazy thing. NVIDIA’s better-than-expected quarterly results led well over a dozen analysts to raise their 12-month price targets on the growth stock to well above the stock’s current price. In fact, several analysts have raised their price targets to over $1,000.
See why Wall Street’s most bullish Nvidia analysts are so optimistic.
Path to $1,000+
Management’s guidance is the most commonly cited reason why analysts are optimistic about Nvidia stock after the latest earnings report. The company said it expects first-quarter sales of about $24 billion, beating consensus analysts’ expectations by more than $2 billion.
KeyBank analyst John Bin raised his 12-month price target for the company from $740 to $1,100. his optimism bernstein And Benchmark (analysts who raised their price target on Nvidia stock to $1,000 after the earnings report) believes the company’s explosive fourth-quarter fiscal year revenue growth and management’s first-quarter fiscal outlook indicate the company’s impressive It’s based on momentum.
Additionally, Vin praised the company’s surge in sales, especially in data centers. Data center revenue increased by 27% quarter-over-quarter and by a whopping 409% year-over-year in the fourth fiscal year.
Nvidia CEO Jensen Huang said during the company’s fourth-quarter earnings call that demand for the company’s data center products is coming from a variety of industries. “Our data center platform is supported by increasingly diverse drivers: demand for data processing, training, and inference from large cloud service providers and GPU specialist providers, as well as enterprise software and consumer internet companies. Jensen explained. Even demand from the auto, financial services and healthcare industries “is now at multi-billion dollar levels,” he added.
Nvidia stock isn’t for everyone
When you combine a surprisingly strong fiscal fourth quarter with management’s guidance for fiscal first quarter sales to increase approximately $16.8 billion year-over-year, it’s easy to see why analysts are optimistic about the stock. I understand. But does this mean investors should still invest at the current share price?
Indeed, with NVIDIA’s fiscal 2024 earnings per share up 586% to $11.93, the stock deserves to trade at a high price. Additionally, the company’s current price-to-earnings ratio of 65 times seems pretty reasonable for a stock whose earnings are growing so quickly.
Even though these factors provide some support for the stock’s current valuation, there is one pressing concern that should keep investors alert. Much of the demand for Nvidia’s data center products is being driven by growing interest in generative artificial intelligence (AI). Not only is this a new technology that is very difficult to predict, but at some point in the future when the industry for these products matures, what will the sales trends surrounding it be like once this initial demand boom has eased? It’s difficult to know.
Similarly, competition in this space may also be more sophisticated than expected. This isn’t the first time Wall Street has underestimated competition. Few people would have predicted that 20 years ago. intel It will lose its edge and be overtaken in size by multiple competitors.
Based on Nvidia’s first-quarter sales guidance and management’s comments on the earnings call that supply for some key products remains constrained, there are no signs yet of a sales setback. However, this is a risk that investors should be aware of.
Therefore, investors should use caution when reading analysts’ rosy 12-month targets for stocks, do their own due diligence, and choose to focus on the long term. Sure, maybe the stock is worth its current price. But if you’re unsure about your company’s future, it’s okay to sit on the sidelines. There are many other stocks to consider.
Should you invest $1,000 in Nvidia right now?
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Daniel Sparks has no position in any stocks mentioned. His clients may own shares in the companies mentioned. The Motley Fool has a position in and recommends Nvidia. The Motley Fool recommends Intel and recommends the following options: Long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
Nvidia Stock: Heading towards $1,100?Originally published by The Motley Fool
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