On Tuesday, UBS has increased its price target on shares of NVIDIA (NASDAQ:NVDA) to $1,150, up from the previous target of $1,100, while reaffirming its Buy rating on the stock. The adjustment comes amid expectations of solid demand for the company's upcoming product releases and a strategic shift towards more comprehensive system offerings.
The firm's analysis suggests that the timing of NVIDIA's Blackwell shipment, anticipated for December, might lead to a period of slower growth, particularly in the October quarter. However, the demand for NVIDIA's Hopper product line remains robust, even with the upcoming transition to Blackwell, which is unusual for such periods.
UBS has revised its revenue and earnings per share (EPS) estimates for NVIDIA significantly upward for the calendar year 2025 (CY25), now expecting around $175 billion in revenue and approximately $41 in EPS. This represents a roughly 20% increase from previous forecasts and is substantially higher than the Street's average estimates of $136 billion in revenue and $30 in EPS. The revision is driven largely by a change in mix assumptions for Blackwell, which is shaping up to have a richer composition than Hopper, based on information from the supply chain.
The strong demand for NVIDIA's GB200 server racks is partly attributed to increasing bottlenecks in power infrastructure components. This challenge is prompting US hyperscalers to prioritize maximizing performance within existing spatial constraints. UBS notes that the higher mix of GB200 and rack-scale systems may lead to revenue stacking, as NVIDIA moves strategically towards becoming a provider of complete systems and full stacks.
For the calendar years 2024 and 2025, UBS has increased its EPS estimates to approximately $28 (up from around $26) and $41 (up from around $34), respectively. Even with these raised estimates, the firm believes there is still upside potential, should the supply chain insights prove to be fully accurate. As a result of these factors, UBS maintains its Buy rating and has raised its price target for NVIDIA to $1,150.
InvestingPro Insights
As NVIDIA (NASDAQ:NVDA) garners a bullish outlook from UBS with a heightened price target, the InvestingPro platform offers additional insights into the company's financial health and market performance. According to real-time data from InvestingPro, NVIDIA boasts a substantial market capitalization of $2.16 trillion, reflecting its dominant position in the industry. The company's P/E ratio stands at 72.07, indicating a high valuation by the market relative to its earnings.
With revenue growth in the last twelve months as of Q4 2024 at a staggering 125.85%, NVIDIA's financial trajectory aligns with analyst expectations of sales growth in the current year. The robust revenue figures are complemented by an impressive gross profit margin of 72.72%, underscoring the company's efficiency and the value of its product offerings. Additionally, NVIDIA's liquidity is highlighted by its ability to cover short-term obligations, as its liquid assets exceed these liabilities.
InvestingPro Tips further enrich the analysis with the observation that NVIDIA is trading at a low P/E ratio relative to near-term earnings growth, suggesting potential value for investors considering the company's growth prospects. Moreover, NVIDIA's status as a prominent player in the Semiconductors & Semiconductor Equipment industry is reaffirmed by its sustained strong performance, including a high return over the last year.
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