NVIDIA's Transformation Is Complete; Canaccord Lifts Price Target To $80

Canaccord Genuity’s Matthew Ramsay expects the Pascal GPU to drive meaningful upside for NVIDIA Corporation NVDA, as compared to the consensus expectations for the October quarter, as well as guidance and results for the January quarter.

Ramsay reiterated a Buy rating on the company, while raising the price target from $70 to $80.

Transformation Complete

The analyst believes the company’s transformation “from a PC-leveraged GPU supplier to a diverse visual-computing company is now complete with growth and overall earnings power now driven by the company's four target growth markets of gaming, enterprise, HPC/cloud, and automotive that now represent >90 percent of non-IPR revenue.”

Ramsay also expects robust gaming GPU growth to continue in the near term, driven by the Pascal ramp, while new trends associated with virtual/augmented reality, deep learning and autonomous driving are expected to drive new market growth in the longer term.

Growth Drivers

Tesla Motors Inc TSLA announced in October that the Sensor Suite for its autonomous vehicles would be powered by an on-board computer run by four separate Tegra GPUs from NVIDIA.

The analyst pointed out that NVIDIA’s gaming franchise was “well positioned for sustained mid-teens growth catalyzed by the launch of Pascal, despite a much improved product portfolio from GPU competitor AMD that is likely to regain discrete GPU share back toward 30 percent over the next couple years.”

According to Motley Fool, the company is likely to launch GeForce GTX 1080 Ti soon, especially given that the holiday season is just round the corner.