Nvidia Has One Of The Best Opportunities To Maintain High Multiple, Morgan Stanley Says In Upgrade

NVIDIA Corporation NVDA is staring at a promising 2020 after witnessing some setbacks in 2019, according to an analyst at Morgan Stanley.

The Analyst

Joseph Moore upgraded Nvidia from Equal-Weight to Overweight and increased the price target from $217 to $259. (See his track record here)

The Thesis

2020 would mark a return to solid growth for Nvidia in both key segments, namely gaming and hpc/cloud, even in a tough semiconductor environment, Moore said in a note.

The stock held up fairly well despite gaming and data center falling short of expectations over the course of 2019. At the same time, the stock has not meaningfully outperformed the broader semiconductor group.

The weakness seen in 2019 could be a thing of the past, as Moore sees catalysts for an acceleration in Nvidia's growth in nearly every vector even amid a tough semiconductor environment.

Ray tracing software, according to the analyst, should generate enthusiasm among gamers for gaming products. Meanwhile, new data center workloads around conversational AI could lead to another leg of data center growth.

Nvidia's stock looks expensive on near-term earnings, Moore said. With the anticipated pullback in shares due to an overly optimistic January quarter consensus not materializing, the analyst sees only upside from here.

Among semiconductor stocks, Nvidia has one of the best opportunities to maintain a high multiple as 2021 approaches. Moore premised his optimism on the benefits of new gaming products.

Price Action

Nvidia's stock, which has gained about 59% in the year-to-date period, traded higher by 2.5% to $216.30 at time of publication.

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