NVIDIA shares target raised on pricing power By
2024-05-11 14:20:03

On Friday, an HSBC analyst increased the price target for NVIDIA Corporation (NASDAQ:) shares to $1,350 from the previous target of $1,050, while reiterating a Buy rating on the stock. The adjustment reflects the analyst's confidence in NVIDIA's ability to leverage its pricing power through its NVL36/NVL72 server rack systems and GB200 platform.

The analyst's optimism is based on the expectation that NVIDIA will surprise the market with its financial performance in the fiscal year ending January 2026. The projection includes a significant pricing advantage for NVIDIA's GB200 platform, with anticipated average selling prices (ASP) ranging between $60,000 and $70,000, compared to the standalone B100 GPU's ASP of $30,000 to $35,000.

The revised price target also takes into account a potential revenue of $196 billion for NVIDIA in FY26, which would stem from its NVL36/NVL72 server rack systems. These systems are expected to have ASPs of $1.8 million and $3 million, respectively, with a total server rack unit assumption of 35,000.

HSBC's new target price is based on an estimated earnings per share (EPS) of $45.16 for FY26, an increase from the earlier estimate of $35.30. The target price-to-earnings (PE) ratio remains at 30 times, which is 0.5 standard deviations below the 5-year historical average for the FY26 estimated price-to-earnings ratio (PER).

The analyst maintains that NVIDIA has potential for a re-rating in FY26, driven by the transition to its in-house CPU-GPU-based GB200 product and a shift towards a mix of higher ASP B series products. Despite being below the historical average, the analyst believes that with approximately 52% upside to the new target price, NVIDIA remains a strong buy.

InvestingPro Insights

With the recent update from HSBC analysts on NVIDIA Corporation's (NASDAQ:NVDA) stock, it's clear that the company is poised for significant growth. According to InvestingPro data, NVIDIA boasts a staggering revenue growth of 125.85% over the last twelve months as of Q4 2024, highlighting the company's robust financial performance. The data also reveals a high gross profit margin of 72.72%, which underscores NVIDIA's pricing power and operational efficiency.

InvestingPro Tips suggest that NVIDIA is trading at a low P/E ratio relative to near-term earnings growth, indicating that the stock may be undervalued given its growth prospects. Additionally, NVIDIA is recognized as a prominent player in the Semiconductors & Semiconductor Equipment industry, which could further solidify investor confidence in the company's market position.

For investors looking to delve deeper into NVIDIA's potential, InvestingPro offers additional insights with over 19 tips available for the company. By using the coupon code PRONEWS24, investors can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing even more valuable information to guide investment decisions.

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