Nvidia Gets Double Upgrade Ahead Of Earnings

The incredible growth of NVIDIA Corporation NVDA coupled with its stock’s lofty market valuation has created plenty of Nvidia bulls and bears on Wall Street. On Wednesday, one prominent bear made a complete 180-degree turn.

The Analyst

Wells Fargo analyst Aaron Rakers issued a double upgrade of Nvidia's stock, upping his rating two notches from Underperform to Outperform. He also more than doubled his price target from $140 to $315.

The Thesis

According to Rakers, Nvidia has several long-term drivers the market doesn’t fully appreciate. He said the number of developers working on CUDA programming has risen by roughly 350,000 in the past year to 850,000. Nvidia also said this week its new Turing GPU architecture and Quatro RTX product cycle will are on tap for the fourth quarter of 2018.

At the same time, Rakers said fears over a decline in cryptocurrency mining demand have been overblown.

“While concerns over gaming GPU channel inventory levels vis-à-vis weakening crypto-currency mining demand could persist (note: Ethereum accounts for ~70% of NVIDIA’s crypto exposure; no Bitcoin exposure), and thus result in a perceived delayed launch of consumer Volta solutions, we think these concerns are well-understood [and] miss the long-term architectural shifts and secular growth drivers moving in NVIDIA’s favor,” Rakers said in the note.

The analyst said Nvidia could be in line to benefit from major demand from the government as it pushed to build next-generation supercomputers over the next five years or so.

Price Action

Nvidia's stock traded lower by 1.3 percent to $258.55 on Wednesday. The company will release Q2 earnings after Thursday's market close

Related Links:

Q2 13F Roundup: How Buffett, Einhorn, Loeb And Others Adjusted Their Portfolio

What To Expect From Nvidia's Q2 Earnings