While Nvidia (NASDAQ:NVDA) is still three weeks away from reporting its Q4 earnings, Bank of America’s Vivek Arya, a 5-star analyst rated in the top 1% of the Street’s stock pros, confidently predicts that Nvidia will achieve modest but still notable beats in both its Q4 2023 earnings and its Q1 2024 forecast.
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Peering into his crystal ball, Arya first declared that Nvidia will report $500 million to $1 billion more quarterly sales in Q4, than the $20 billion in sales that Wall Street’s consensus calls for. The analyst quickly segued into damage control over this presumed “beat,” however, opining that such a: “3-5% beat would pale vs. the 10%/22% beat/raise of prior quarters and perhaps disappoint some bulls,” but that a smaller beat of this size is actually a good thing because it creates opportunities for Nvidia to keep on beating expectations in the future.
Yes, you read that right. Arya says, first, that there’s a consensus that Nvidia will sell $20 billion worth of computer chips. However, there’s apparently also a consensus that Nvidia will sell much, much more than $20 billion worth of computer chips, such that if Nvidia only sells $21 billion (i.e. $1 billion more than the first consensus), some people will be disappointed that it didn’t exceed… the second consensus.
However, for Arya, he seems quite satisfied with a $1 billion beat. Since he already anticipates it happening, he is reaffirming his Buy rating on NVDA stock and increasing his price target by $100, setting it at $800 per share. This implies a potential upside of approximately 21% from current levels. (To watch Arya’s track record, click here)
So what’s the source of all this optimism? By all accounts, Nvidia chips tailored for artificial intelligence functions are selling like proverbial hotcakes, what with Alphabet integrating AI into search and putting AI on its handsets, Meta creating new “AI-based advertising tools,” Microsoft crediting AI with creating six of the 18 percentage points of sales growth it booked last quarter, and Nvidia itself teaming up with everyone from Dell to HP to SAP to VMware on new partnerships.
Looking ahead to 2025, Arya says Nvidia stock is selling for just 25 times the profit it will earn next year, despite growing its profits at a 45% compound annual rate, resulting in a PEG ratio of less than 0.6 for the stock — far less than the 1.0 PEG ratio that is the touchstone for value investors.
Overall, it’s clear that Wall Street likes what it sees here. The stock has 38 recent analyst reviews, including 34 Buy ratings against 4 Holds (i.e. neutral), for a Strong Buy consensus rating. (See NVDA stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
