Nvidia Has A Massive Market Opportunity; SunTrust Upgrades To Buy

Analysts at SunTrust Robinson Humphrey turned bullish on one of 2016's best performing and one of 2017's most hotly debated stocks: NVIDIA Corporation NVDA.

SunTrust's William Stein upgraded Nvidia's stock from Hold to Buy with a price target boosted from $124 to $177, mostly due to expectations for revenue and earnings per share upside across all major segments, including Datacenter, Gaming and Automotive.

Stein acknowledged that his original estimates were "under-forecasted" and doesn't reflect the growth potential across all segments. For example, since initiating coverage, the company averaged a year-over-year growth rate of 194 percent in datacenter (106 percent above expectations), 60 percent in gaming (32 percent above expectations) and 41 percent in automotive (10 percent above expectations).

Late To The Party But Not Too Late

But that was then and this is now. Fortunately there is still room for upside in Nvidia's stock, the analyst suggested.

Within the datacenter segment, consensus estimates are calling for an average year-over-year growth rate of 61 percent through 2018, but the analyst now expects a growth rate of 82 percent with a 64 percent compounded annual growth rate through 2020 with upside to 75 percent being a "reasonable" expectation.

In fact, a 75 percent compounded annual growth rate through the end of the decade implies Nvidia will capture only 26 percent of the estimated $30 billion total addressable market.

The analyst also expects above Street estimates for the Gaming segment, although to a lesser degree. Consensus estimates call for a year-over-year growth rate of 11 percent through 2018 but there exists upside potential to 15 percent.

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Image Credit: By yoggy0 from Yokohama, Japan (SIGGRAPH Asia 2009) [CC BY 2.0], via Wikimedia Commons