Goldman Sachs analyst revisits Nvidia stock price target ahead of earnings

Aug 19, 2024
goldman-sachs-analyst-revisits-nvidia-stock-price-target-ahead-of-earnings

Updated at 8:48 AM EDT

Nvidia shares edged higher in early Monday trading after analysts at Goldman Sachs kept the AI-chip maker on a key list of recommended stocks heading into its highly anticipated second quarter earnings next week.

The market’s star performer this year, Nvidia  (NVDA)  shares were hit hard by the global market turmoil tied to the so-called yen-carry trade in early August, but have since staged an impressive 20% recovery on the back of investor bets that its staggered line of AI chips and processors will hold their commanding market share well into 2025 and beyond.

Investors will get an updated view of that thesis next week in fact, when Nvidia reports its earnings and near-term outlook, with investors focused on the impact of reported delays to its new line of Blackwell processors, which are set to begin shipping early this autumn.

Blackwell processors have been touted as faster, cheaper and more efficient than Nvidia’s H100 Hopper predecessors. But according to a report from The Information earlier this month, they could be delayed due to design flaws,

Analysts had expected Blackwell to generate revenue for Nvidia starting in the third quarter and find their way into global customer data centers by the year’s final three months.

Nvidia investors will be keying on the impact of reported delays to its new line of Blackwell processors when it reports for the fiscal second quarter next week. <p>Bloomberg/Getty Images</p> <p>” data-src=”https://s.yimg.com/ny/api/res/1.2/ppF_hN_scUytfjSJF3G9Mw–/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTY0MA–/https://media.zenfs.com/en/thestreet_881/c4f16234862fe46457b5ace6b82ac68a”></img></p> </div> </div> <div><figcaption>Nvidia investors will be keying on the impact of reported delays to its new line of Blackwell processors when it reports for the fiscal second quarter next week.</p> <p>Bloomberg/Getty Images</p> </figcaption></div> </figure> <p>Goldman Sachs analyst Toshiya Hari, who reiterated his ‘conviction buy’ rating and $135 price target on Nvidia heading into next week’s update, said the demand story for Nvidia remains compelling.</p> <h2>Blackwell delay in focus</h2> <p>“While the reported delay in Nvidia’s Blackwell (i.e., next-generation GPU architecture) could lead to some near-term volatility in fundamentals, we expect management commentary, coupled with supply-chain data points over the coming weeks, to lead to higher conviction regarding Nvidia’s earnings power in 2025,” Hari and his team wrote.</p> <p>“Importantly, we believe customer demand across large cloud service providers and enterprises is strong, and Nvidia’s robust competitive position in AI/accelerated computing remains intact,” Hari added.</p> <p>Nvidia told investors in May that current-quarter revenue would rise to around $28 billion, a  stronger-than-expected tally assuaged investors’ concern about a so-called air pocket created by the Blackwell launch. Some had worried that customers would cancel orders for the older H100 chips and wait for the newer system processors to ship later in the year.</p> <p><strong><a data-ylk=Related: Big names exit Nvidia stock as AI giant stumbles before earnings

For the the three months ended in July analysts see Nvidia posting adjusted earnings of 64 cents a share with revenue rising nearly 90% from the same period last year to $25.6 billion.

“From a stock perspective, we believe the setup for Nvidia is constructive, with the stock trading at 42 times [next twelve months] consensus earnings per share,” Hari said. That’s “a relative premium of only 46% (vs. its past three-year median of 151%), and our updated Bull/Bear framework indicates a favorable risk/reward balance.”

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Nvidia shares were last marked 0.2% higher in premarket trading to indicate an opening bell price of $124.84. a move would peg the stock’s gain from just prior to the carry-trade selloff to just over 16%.

Related: Nvidia stock tumbles in tech slump amid questions over key chip

The stock was also held back in early Monday trading by news of Advanced Micro Devices’  (AMD)  $4.9 billion purchase of privately owned server maker ZT Systems, which analysts see as expanding the chipmaker’s AI capabilities and its nascent challenge to Nvidia’s market dominance.

Related: Veteran fund manager sees world of pain coming for stocks

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