Why This Analyst Sees 15% Upside Potential For Nvidia Shares

Shares of Nvidia Corporation NVDA, the most valued chipmaker in the U.S., are poised for incremental gains, according to an analyst at Susquehanna Financial Group.

The Nvidia Analyst: Christopher Rolland maintained a Positive rating on Nvidia shares and increased the price target from $220 to $250, representing a 15.4% upside from current levels.

The Nvidia Thesis: After-market GPU price premiums — the markup over manufacturer suggested retail price, or MSRP — is levelling off sequentially but remain at or above 80% premium, analyst Rolland said.

Graphics card average selling prices decreased for Nvidia and Advanced Micro Devices, Inc. AMD, as availabilities for higher-end Ampere/Big Navi cards remain limited, pushing up the mix of lower-end cards, the analyst said.

Related Link: Why Nvidia Stock Analysts Are Bullish After Q2 Earnings

Nvidia, the analyst said, gained back GPU share from AMD in the aftermarket, desktops and laptops, apparently due to better availability and in-line with recent rumors that the company may even introduce re-worked, older-gen models to alleviate the supply crunch.

SSD attach rates remain at a near-record 86%, the analyst noted.

Rolland sees A100 ramp in the data center market, T4 adoption and Ampere gaming launches as catalysts for Nvidia.

Susquehanna's upwardly revised $250 price target is based on a P/E multiple of 70 times the firm's calendar year 2021 adjusted EPS estimate, the analyst said. The multiple, the analyst said, was increased from 61.5 to 70, as the company has gained GPU market share.

"While this multiple is higher than the group median of ~23.5x, we view it as warranted as the company is well-positioned to take advantage of flourishing end markets," he added.

Nvidia Price Action: Nvidia shares were down 4.36% at $207.19 as of Tuesday morning.

Related Link: Why AMD Is Looking 'Solid' Into The Year-End

Photo: Courtesy Nvidia