Goldman Sachs Removes Nvidia From Conviction List, But Maintains Bullish Stance

To say NVIDIA Corporation NVDA has been a good investment in recent years is quite an understatement. Unfortunately, it may have been a little too good in the view of one analyst.

The Analyst

Goldman Sachs analyst Toshiya Hari removed Nvidia from the Conviction List, but maintains a Buy rating and $281 price target for the stock.

The Thesis

Nvidia shares have simply come too far to warrant a spot on the Conviction List, Hari said in a note. 

“While we continue to see meaningful upside to FY2019/2020 estimates and maintain our Buy rating, we believe a) the long-term secular growth angle in data center is now better understood and b) near-term dynamics in cryptocurrency demand may lead to increased earnings volatility." 

Data center will remain a high-growth, high-margin business for Nvidia in the long-term, but fiscal 2018 and 2019 consensus  revenue estimates for the segment have risen by 70 percent and 91 percent, respectively, from a year ago, leaving little room for additional upside, Hari said.

While ethereum mining has provided at least a short-term shot in the arm to Nvidia’s GPU sales, Hari said much of that benefit is offset by the uncertainty and volatility of the cryptocurrency market. Investors are likely discounting the value of these GPU sales due to their unpredictable nature, the analyst said.

Overall, Goldman remains bullish on Nvidia, and Hari sees 16-percent upside to consensus 2019 revenue estimates and 31-percent upside to 2020 revenue estimates.

Price Action

Nvidia stock was up 0.19 percent Thursday at the time of publication.

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Photo courtesy of Nvidia.