Bull of the Day: NVIDIA (NVDA)

NVIDIA NVDA has been a rocket in the past month -- up over 40% since October 25 -- even before two events which sent it higher still.

The two events were (1) its annual GPU Tech Conference on November 9, which is always full of great surprises from Jensen Huang and his teams of engineering wizards; and (2) its Q3 beat-and-raise earnings report last Wednesday.

I wrote and talked about the first event here...

NVIDIA GTC Lessons in 2 Minutes from Professor Huang

In the video, I share a 2-minute clip from Jensen's keynote where he summarizes multiple factors driving the success of the NVIDIA hardware-software stack known as CUDA (Compute Unified Device Architecture).

In the article attached to that video, I describe in more detail five big take-aways from that segment.

I thought it would be fun to view the spectrum of analyst reactions before-during-after these two events -- plus one other catalyst that happened in late October.

Analysts (Besides Yours Truly) Who Saw It Coming

Followers know I've had them buying and holding NVDA near $200 all year. But today I want to show you the entire landscape of other analysts, including a few who've been right there with me.

The rocket commenced a launch sequence on October 26, as Piper Sandler analyst Harsh Kumar raised his price target on NVDA to $260 from $225. His rationale wasn't that compelling -- more gaming GPU sales and higher prices on Ebay to off-set crypto declines -- but his action may have ignited a pending technical breakout above the $230 resistance level that presaged a bigger catalyst.

Then two days later, Meta Platforms FB announced its name change in alignment with its summer heads-up about Zuckerberg's plans to become a "metaverse" company. While it seems an interesting strategy to distance the mothership from the Facebook Newsfeed, long-time investors knew this was a place the Oculus owner was headed.

Why would this FB strategy shift be important to NVIDIA?

Because NVIDIA had already been working on its Omniverse platform to serve everyone from gamers and creators to industrial engineers and science explorers.

Neither stock did much in the days after the Meta Platforms reveal. But then on November 4, one analyst saw the light...

Wells Fargo analyst Aaron Rakers raised his price target on NVDA to $320 from $245 noting that the "company is expected to officially launch the general availability of Omniverse Enterprise next week at GTC 2021." He expected this to be one of the key highlights.

NVDA shares surged 12% that day on massive volume of 115 million shares. See how we weren't even to GTC or earnings yet before the rocket launched?

Rakers told investors that he believes NVIDIA Omniverse Enterprise "represents a significant platform expansion strategy" for the company, which also entails a deepening recurring software story. He described Omniverse as a "key enabler and platform for the development of the Metaverse across a wide range of vertical apps, including industrial, manufacturing, design and engineering, autonomous vehicles/robotics, and more."

What is the Omniverse?

While adding that Omniverse could provide a "halo effect" to the company's product portfolio, Rakers went on to describe what the platform actually does, noting that Omniverse is an open virtual platform that allows creators to collaborate in real-time physically-accurate simulations/3D renderings.

This has been a key theme I've described about the synergy between NVIDIA's gaming architectures and its ability to design, test and simulate new chips and software. As a platform for connecting 3D worlds in a shared virtual universe, the key technology powering Omniverse is Nucleus -- a database engine that allows client applications to share and modify 3D assets and scene descriptions.

Nucleus is based on Pixar's open Universal Scene Description technology, which provides a common language for defining digital assets. NVIDIA released an open beta of Omniverse in December 2020, and announced coming general availability of Omniverse Enterprise in April 2021. Omniverse Enterprise subscriptions starts at $9,000 per year for a workgroup of two creators, 10 reviewers, and 4 Nucleus subscriptions.

Here Comes the Herd

On November 8, an analyst who might have read the Wells Raker report chimed in...

BMO Capital analyst Ambrish Srivastava raised the firm's price target on NVDA to $375 from $250, stating that the recent announcements from Meta Platforms has put the attention on the new fad, but NVIDIA has been "ahead of the curve" in creating an Omniverse "platform" for enabling the metaverse in multiple industries.

Okay, now let's see who also jumped after GTC on Nov 9...

Truist analyst William Stein raised his price target on NVDA to $360 from $257, citing that the company's software investments are "becoming more prominent" after the management introduced new software tools and AI models at its GTC event. Stein added that while investors did not get the gaming RTX40 series or other "obvious" model upside drivers, based on feedback from industry contacts, he was updating his model for higher growth in NVIDIA's Datacenter, Professional Vizualization, and Gaming segments.

On Nov 12, this analyst gave a reluctant price target bump...

Wedbush analyst Matt Bryson downgraded NVDA to Neutral from Outperform while also boosting his price target to $300 from $220. The analyst cited valuation for the downgrade with the shares trading at 55 times his 2024 numbers. However, Bryson believes the combination of "unprecedented demand" for both data center and client offerings will allow NVDA to again exceed expectations next week when its reports.

Here were three more reluctant bulls trying to play catch-up with giant price target jumps...

Oppenheimer analyst Rick Schafer raised his price target on NVDA to $350 from $235, raising estimates ahead of the company's results on November 17. He saw upside to consensus estimates for fiscal Q3 led by data center, artificial intelligence and gaming, while noting supply constraints.

Susquehanna analyst Christopher Rolland raised his price target on NVDA to $360 from $250 saying he expected strong results and guidance but could also envision signs of a potential deceleration vs. the "white-hot results" of late.

Credit Suisse analyst John Pitzer raised his price target on NVDA to $400 from $225 ahead of quarterly results. The analyst believes secular tailwinds continue and risk of any crypto-correction is unlikely at least until supply improves in the second half of 2022. While the earnings report may or may not be "good enough," Pitzer believes there is nothing to derail the long-term bullish narrative.

See the pattern? Analysts who were behind because they are still trying to value NVDA as a hardware company instead of a complete hardware-software game-changer.

Post-Earnings Scramble

Let's start with the resident bear of the group...

Deutsche Bank analyst Ross Seymore raised the his price target on NVDA to $285 from $185, keeping a Hold rating on the shares. The analyst said the strength of data center will "justifiably garner the majority of investor attention" as the near-term tailwinds appear likely to persist well into 2022 and beyond as NVDA enables a wide array of emerging technologies.

The smart BMO analyst didn't raise his PT, but he did share these additional thoughts after the report...

"NVIDIA uniquely positioned to benefit from a shift in the compute landscape" said analyst Ambrish Srivastava, who kept his Outperform rating and $375 price target on NVDA. He boosted his FY22 EPS view by 16c to $4.33 and FY23 view by 48c to $5.25 after the Q3 earnings beat. The analyst cited the company's commentary that its visibility into the hyperscale market is better than ever going into a "big" 2022 with only about a quarter of its gaming installed base having migrated to the new Ampere architecture.

And Harsh from Piper, who coincidentally lit the technical fuse on Oct 26, decided to join the crowd...

Piper Sandler analyst Harsh Kumar raised his price target on NVDA to $350 from $260, noting the company provided January quarter guidance well ahead of expectations: NVIDIA expects both gaming and data center to drive growth sequentially in the January quarter, with data center providing a larger contribution.

Well that's what I've been saying for a year: that datacenter would overtake gaming in revenues within 12 months sometime in 2021.

Then here was the post-earnings update from William Stein, who has been a solid NVDA bull for many years...

Truist analyst William Stein raised his price target on NVDA to $389 from $360, praising the revenue and margin upside along with better than expected guidance. Stein also offered this unique observation from his model: the Q3 announcement will also be a "pre-cursor" to Q4, when NVIDIA will guide for "stronger" data center growth in Q1 and FY22.

The Path to $400

One analyst always has to be top of the Street heap on price targets. The first to claim the high ground was John Pitzer at Credit Suisse.

Before I give you the analyst who joined him, let's do a couple more honorable mentions...

KeyBanc analyst John Vinh raised his price target on NVDA to $350 from $260 after the company posted strong beat-and-raise results that were driven by data center strength and steady cloud and enterprise demand.

Raymond James analyst Chris Caso raised his price target on NVDA to $365 from $225, reiterating a Strong Buy rating on the stock. The company reported a "strong quarter and an even stronger guide" as supply increases and as datacenter demand continues to accelerate.

Caso added that while NVIDIA's valuation is elevated, its "level of growth can be found nowhere else in the semi space, and we don't see that slowing anytime soon."

I, of course, cannot argue with that sentiment. Finally, here's our second $400 call...

Needham analyst Rajvindra Gill raised his price target on NVDA to $400 from $245, highlighting the 42% growth in Gaming and 55% growth in Data Center revenue. Gill added that only 25% of the current 250M GeForce installed base is on RTX-enabled cards, suggesting a lengthy upgrade cycle ahead and more Gaming upside.

Meanwhile the analyst noted that NVIDIA's Data Center business is being driven by growth of deep learning Inference as GPU acceleration continues to proliferate in servers with more processors moving to the Ampere architecture.

Bottom line: As I tell my TAZR Trader members, where we own NVDA from $120, always buy the dips. There's nothing better than discovering a stock where you can consistently "average up."

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