Nvidia Analyst Raises Price Target By 78%: 'Chipmaker Has Largest TAM Expansion Opportunity In All Of Tech'

Nvidia, Inc. NVDA shares received a big upward price target revision from Credit Suisse shortly ahead of the graphic chipmaker's quarterly results.

The Nvidia Analyst: Join Pitzer reiterated an Outperform rating on Nvidia and increased the price target from $225 to $400, signaling roughly 33% upside from current levels.

The Nvidia Thesis: Secular tailwinds continue and risk of any crypto-correction is unlikely at least until supply improves in the second half of the calendar year 2022, Pitzer said in a note.

The analyst estimates third-quarter revenues and earnings per share of at least $6.96 billion and $1.13, respectively, above the consensus of $6.80 billion and $1.10.

The Gaming business, accounting for about 46% of the total revenues, will likely see upside relative to expectations, Pitzer said. This is premised on factors such as the company's conservative guidance, positive supply chain and lean inventories amid tight supply.

The Data Center Group, accounting for about 40% of the total revenues, may also surprise to the upside due to strong adoption and the impact of universal inference as well as the IDFA, Pitzer said.

Related Link: Why This Nvidia Analyst Expects Strong Q3 Earnings, Outlook

Nvidia is likely to guide fourth-quarter revenues and EPS, with the midpoint at $7.1 billion and $1.20, respectively, well above the consensus of $6.8 billion and $1.09, the analyst said. The sequential revenue growth of 2.1%, however, is below seasonal, due to supply constraints.

"We continue to argue NVDA has the largest TAM expansion opportunity not just in Semis but in all of Tech – NVDA enables AI/ML which in turn systematically reduces analytics costs, unlocking the >98% of data today that sits "dark," Pitzer said.

The pivot towards higher-margin recurring Software increases value capture by up to two times, especially in Auto and Enterprise, even before factoring in Meta/Omni-verse business models, the analyst said.

Credit Suisse's 12-month price target of $400 would propel Nvidia into the $1 trillion club, potentially making it the first semiconductor company to do so, Pitzer said. The valuation is expensive but the TAM expansion is accelerating, providing ample room to grow into multiples.

NVDA Price Action: Nvidia shares rose Tuesday 0.59% to $302.03.