NVIDIA Corporation (NASDAQ:NVDA) has climbed to all-time on the back of multiple price target hikes. Is NVDA stock still a good buy?
Shareholders of NVIDIA Corporation (NASDAQ:NVDA), the Santa Clara, California based GPU leader will be more than happy with the way things have panned out over the last couple of years. NVDA stock price is up by over 600% in the last two years, crushing the 35.5% gains of the Nasdaq Composite (INDEX:COMPX). When looking back over the last one year, NVIDIA stock has had an equally impressive run, up nearly 200% compared to 27% rise in the benchmark index. Given the stellar run the stock has had so far, its no surprise to read headlines like "NVIDIA stock hits fresh all-time highs."
NVIDIA stock closed the last trading session at a price of $197.93 a share, 12 cents below the all-time high of $198.05, which also came in the last trading session. With NVIDIA stock pushing towards the $200 mark, an important question comes to mind: Is NVIDIA Corporation stock a good buy at fresh all-time highs?
Is NVIDIA Stock Worth $250?
If NVIDIA's stellar run on the bourses is luring you into booking some profits and taking some money off the table, well, you can't be blamed. The NVIDIA stock rally has been the stuff investors dream of. But, before you entertain thoughts of selling your NVIDIA shares, do read this. The stock is receiving a lot of love on Wall Street with recent commentary hinting at brighter times ahead. Analysts at Barclays, Goldman Sachs (NYSE:GS), Needham and Mizuho have reiterated their buy/outperform rating and hiked price targets over the last fortnight alone. The commentary from Needham, following recent conversations with NVIDIA CEO Jensen Huang, was extremely encouraging with Needham analysts citing NVIDIA's datacenter potential to issue the stock with a street-high price target of $250 a share.
As we have stated multiple times in the past, the data center segment is the fastest growing segment at NVIDIA. With revenue of $416 million in Q2 FY18, the segment is now the second biggest operating segment for the Jensen Huang led GPU giant.
The segment has grown at a phenomenal rate of 187% YoY over the last twelve months (LTM). According to the analysts at Needham securities, the datacenter TAM for NVIDIA could fall between $21B to $35B over the next 5 years. To put things in perspective, NVIDIA reported datacenter revenue of $1.36 Billion over the last four quarters. With the lower end of the TAM range 15x the LTM datacenter revenues, the growth in NVIDIA's data center segment is not slowing down anytime soon.
NVIDIA Stock Is A Play On Strong Gaming And CryptoCurrency Trends
Not too long ago, we had highlighted that NVIDIA stock was a safe bet on the cryptocurrency boom. Analysts at Wall Street firm Mizuho securities seem to agree on that front. Mizuho Securities was the latest Wall Street firm to issue bullish commentary on NVIDIA stock, with analyst Vijay Rakesh raising his NVIDIA stock price target to $220, a $40 hike from the earlier price outlook. And, what did the Mizuho analyst have to say?
Vijay cited the strong GPU pricing trends, supported by encouraging trends in the underlying gaming and cryptocurrency markets. In a recent client note, Vijay wrote, "We believe NVDA continues to see strong underlying trends in cryptocurrency and gaming ahead of company expectations, even as GPU pricing remains stable post launch." We believe that the strength in these markets will support strong growth in NVIDIA's gaming segment, which has posted some stellar growth over the last few quarters.
The gaming segment is the largest revenue segment for the GPU major, contributing 57.6% of the company's total revenue over the last 4 quarters. The growth in this segment has been impressive as well, with the LTM revenue swelling by 58% over the year-ago comparable numbers.
We believe that NVIDIA is poised for strong momentum in two of its largest revenue segments. The Gaming and 'data center' segments accounted for nearly 74% of NVIDIA's last twelve months revenue and hence, momentum in these segments is central to any bullish thesis on NVIDIA stock. With the recent Wall street commentary highlighting the huge potential in these markets, NVIDIA stock remains a solid long-term play. In addition to the strength in the core gaming and data center growth, NVIDIA stock will also leverage growth in 'AI at the edge' as well as the Autonomous driving markets, each of which could represent multi-billion dollar opportunities. To sum up, it's fair to say that NVIDIA is firing on all cylinders, which should continue to drive NVDA stock to new highs. However, as a caution for the NVIDIA bulls, the NVIDIA stock technical chart had recently flashed some bearish signals, which implies that a near-term pullback might be due. Hence, we believe that a staggered approach, which will allow investors to buy into any dips, is the best way to accumulate long-term positions in NVIDIA stock.
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