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The Ratings Game: Nvidia stock rockets more than 10% on stellar earnings, on track for new record

Nvidia Corp. shares zoomed out of the gate Thursday morning, rallying more than 10% in the first few minutes of trading, as Wall Street analysts could find little to complain about in the chip maker’s earnings report and outlook as it turned in another record quarter.

Nvidia
NVDA,
+9.09%

shares gained more than 11% to an intraday high of $326.07 and were well on-track for a new closing record. Shares last closed at a split-adjusted all-time high of $308.04 on Nov. 8.

Late Wednesday, Nvidia turned in yet another quarter of record sales, beating Wall Street estimates across the board, and forecasting an outlook that also exceeded expectations. That followed last week’s GTC, where Nvidia unveiled several new tools, such as Omniverse expansions, to help developers build the so-called metaverse, which several analysts mentioned in their reports.

Of the 43 analysts who cover Nvidia, 35 have buy ratings, six have hold ratings, and two have sell ratings. Of those, 24 raised price targets, resulting in an average price target of $325.31, up from a previous $280.70, according to FactSet data.

Susquehanna Financial analyst Christopher Rolland, who has a positive rating and recently raised his price target to $360 from $250, “like clockwork” turned in “another raise and beat,” and called out Nvidia Chief Executive Jensen Huang’s remarks on underpenetration of the data center.

“Interestingly, Jensen believes that less than 10% of servers are accelerated by GPUs today, but that attach will grow to 100%,” Rolland said.

Evercore ISI analyst C.J. Muse, who has an outperform rating and a $350 price target, said that Huang is “just getting warmed up,” and that the “clear takeaway” is that “there remains a long runway of growth ahead of Nvidia.”

“For Gaming, seasonality is out the window with the company echoing the view that this segment should continue to grow into FY23 considering very lean channel inventory,” Muse said.

“And Data Center is expected to shine once again in CY22 with [cloud service providers] scaling out deep learning and AI workloads aggressively along with help from continued penetration of Ampere at vertical customers and budding software opportunities, supporting excellent visibility and ‘quite a good year’ for the segment,” Muse added.

Bernstein analyst Stacy Rasgon, who has an outperform rating and a $360 price target, said it’s “hard to imagine things going smoother” for Nvidia, but kept a sharp eye on the stock’s already high price.

With shares “admittedly trading at eye-watering levels and likely requiring investors to begin underwriting some of the new software/metaverse-y opportunities,” Rasgon said that “valuation without a catalyst is a poor reason to make a move, and while we admit to white-knuckling it a bit here we see a narrative that is growing stronger rather than weaker.”

Jefferies analyst Mark Lipacis, who has a buy rating and raised his price target to $370 from $260, said he estimates a total addressable market of $80 billion from Omniverse licenses.

“We think virtual reality will find its way into numerous other applications not yet fully comprehended by the market,” Lipacis said.

Over the past 12 months, Nvidia shares have rallied 140%, while the PHLX Semiconductor Index 
SOX,
+1.07%

 surged 96%, the S&P 500 index 
SPX,
-0.11%

 rose 32%, and the tech-heavy Nasdaq Composite Index 
COMP,
-0.11%

gained 35%.

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