Analyst Stacy Rasgon from Bernstein reiterates his Outperform rating for Nvidia stock and maintains his $700 price target for the shares. Despite already tripling in value this year, Rasgon believes Nvidia stock still presents an attractive buying opportunity.
According to Rasgon, Nvidia is currently the most cost-effective stock within the ‘AI narrative’ category. At the start of trading on Friday, Nvidia stock rose by 1.5% to reach $490.52, and it has experienced a staggering 236% increase in value this year.
However, Rasgon points out that the stock’s year-to-date return has been relatively underwhelming due to its decreasing multiple. While forward earnings estimates have quadrupled this year, the stock’s multiples have diminished by nearly two-thirds during the same period.
Currently, Nvidia trades at only 25 times its forward earnings, marking its lowest level since the conclusion of 2018. This suggests that it has a lower price-to-earnings multiple compared to Advanced Micro Devices (AMD), which trades at 41 times.
Rasgon emphasizes that even if AMD achieves its AI chip sales target next year, it would likely be insignificant in the grand scheme of the industry. Nvidia remains dominant in the market for AI datacenter chips.
Anticipating future growth, Rasgon reveals that Nvidia plans to launch a successor to its highest-end H100 data center GPU in Q2 of next year, followed by another faster GPU by the end of 2024. These product releases could potentially result in higher prices and generate substantial revenue for Nvidia until 2025.
Although there might be potential risks ahead, Rasgon remains highly optimistic about Nvidia’s long-term prospects and growth opportunities.