When it comes to artificial intelligence, Nvidia (NASDAQ:NVDA) is in a class of its own as the key enabler of the technology, said equity analysts at Evercore ISI in a note to clients. The stock remains a “top pick” with an Outperform rating and a price target of $550. With potential for massive earnings growth, despite a huge rally in the stock this year, the firm thinks shares are still cheap.
Nvidia’s share price has nearly tripled so far this year amid increased optimism over potential growth in demand for semiconductors that can process AI workloads. The run higher has some investors concerned shares have become too expensive, but because of the potential for fast growth, in reality the price is still low, in the view of the analysts.
“With the stock at ~$425 today, NVDA is only trading ~14x 2027 EPS vs our EPS CAGR estimate of 55%. If our assumptions of acceleration trajectory prove correct, shares actually screen cheap (we know, crazy!!). So there is still PLENTY of runway ahead,” said analysts.
The Evercore ISI analysts added, “The debate for the name at its ~$1T valuation is largely centered around hype vs reality – and we are very much of the view the that trends we are seeing today are reality and we remain just at the tip of the generative AI iceberg.”
The firm sees EPS upside to $30 in 2027, implying massive growth from consensus EPS of less than $8 this year.
“If we assume that a 20% attach rate can be achieved by 2027 (vs MSD% today), this would imply NVDA earnings power of ~$30 in CY27. More near-term, we assume ~645k accelerated servers in CY23 which supports our EPS of $8.00. If our industry checks suggesting a figure closer to 1M accelerated servers proves correct, we note meaningful upside to NVDA 2023 earnings as well (beats/raises to continue),” said the analysts.
Evercore analysts weren’t the only ones on Wall Street to make positive comments on Nvidia. Analysts at Mizuho also commented on the stock, saying there was no replacement for it when it comes to AI. They also expect rapid growth.