Bank Of America Raises Nvidia Price Target To A Street High, Sees Upside In Multiple Segments

Shares of NVIDIA Corporation NVDA, which have rallied about 38 percent year-to-date, have additional runway for upside ahead, according to Bank of America Merrill Lynch. The firm raised its price target for Nvidia shares only a day after reiterating the figure.

The Analyst

Vivek Arya reiterated a Buy rating on Nvidia and named it as the top sector pick. The analyst raised the price target from $340 to a Street high of $360, suggesting roughly 36-percent upside from current levels.

The revision reflects a roll forward to 32 times calendar 2020 EPS estimates.

The Thesis

Nvidia's new Turing GeForce RTX architecture simultaneously supports high-end gaming, AI and pro-viz features in the same chip, the first of its kind, driving significant upside in multiple segments, Arya said in a Tuesday note. (See his track record here.) 

The Street might be underestimating Turing's multipronged capability relative to the primarily gaming-only focus of Pascal in 2016, the analyst said. 

BofA expects Turing to boost ASP across every price point of the gaming stack, Arya said. 

Pro Viz, Turing's photoreal rendering, is an $1.5 billion opportunity, in BofA's view. The sell-side firm expects Turing-based Quadro cards to drive a 15-20 percent-plus annual growth rate in the Pro Viz segment compared to 8-9-percent growth in the consensus estimate. 

Nvidia "already dominates the AI training market, but with the new Turing T4, it is also building a moat in the relatively untapped $20-billion market for inference accelerators," Arya said.

The Price Target

Nvidia shares were trading up 0.32 percent at $266.55 at the time of publication Tuesday. 

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Photo courtesy of Nvidia.