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Nvidia shares still offer an attractive valuation even after this year’s 170% rally, BofA says.
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The bank highlighted Nvidia’s software offering as a catalyst that could drive the next phase of growth.
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There are five reasons why investors should view any decline in Nvidia stock as a buying opportunity.
Nvidia is up 170% this year to become the largest company in the world this week, but the stock still presents an attractive investment opportunity – and any decline in the stock should be used as an opportunity to buy more.
That’s according to Bank of America analyst Vivek Arya, who in a note Wednesday outlined a handful of reasons why investors should remain optimistic about the chipmaker powering the artificial intelligence boom.
“Nvidia stock’s steep climb, up 50% in CQ2 alone (vs. SPX up 4.4%) could leave it vulnerable to near-term profit-taking,” Arya said. “But we argue that any volatility is likely to be short-lived.”
Here are the five reasons why Arya remains bullish on the stock.
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“GenAI hardware deployments are still only in the second year of what could be a three- to five-year deployment cycle,” Arya said, adding that the company has a $300 billion opportunity to capitalize on, which is approximately is three times larger than Nvidia’s expected revenue this year. year.
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“The benefits of NVDA’s next-generation, purpose-built Blackwell AI accelerator systems will begin later this year, with solid demand/visibility among cloud customers,” said Arya.
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“On-premise enterprise/government AI demand plus early-stage software monetization,” said Arya.
“We believe recurring software services can unlock the next step in growth while strengthening direct relationships with business users,” said Arya.
Nvidia’s potential to build a significant recurring revenue stream from its CUDA software offering is what prompted Rosenblatt to raise his price target for Nvidia to a street-high $200 per share on Tuesday.
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“The valuation is attractive at a 35-40x consensus and only ~30x price-to-earnings ratio under a bull-case $5/sh earnings scenario,” Arya said, adding that the stock is trading at a lower valuation today than last year.
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“Unlike the ‘dot-com boom’ that was funded by risky debt, the deployment of genAI is a mission-critical race between some of the best-funded (cloud) customers,” said Arya.
Arya reiterated his Buy rating on Nvidia stock and his $150 price target, which represents an upside of 12% from current levels.
Read the original article on Business Insider
