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Why Nvidia stock could soar another 28% in 2021

Bank of America analysts recently lifted their price target on the Nvidia stock to US$665 from US$650, after the semiconductor firm posted better-than-expected third-quarter results.

  • Nvidia shares could rally a further 28% in 2021, says Bank of America
  • Analysts recently raised their price targets to US$665 from US$650
  • The higher target comes after Nvidia’s better-than-expected third-quarter results

What’s the forecast for Nvidia in 2021?

The NVIDIA stock could potentially rally as much as 28% in the next 12 months, according to Bank of America (BoA) analysts.

The investment firm raised their price target on the US’ largest semiconductor company in a recent note to US$665 from US$650 - 28% higher than Tuesday 24 November 2020’s closing price of US$518.31.

BoA also reiterated a ‘buy’ rating for the shares.

The firm’s latest price case was made after Nvidia posted better-than-estimated third-quarter earnings last Wednesday 18 November 2020, in which revenue burgeoned 57% from the same period a year prior.

Meanwhile, its computing and networking arm sales also more than doubled to US$1.94 billion for the same reporting quarter.

What’s the forecast for Nvidia in 2021?

In their note, BoA analysts underscored Nvidia’s 37% year-on-year organic sales growth, stating that this figure surpassed those of other semiconductor firms.

They added that the PC chipmaker’s 4% earnings before interest and taxes (EBIT) growth rate for 2020 also places it among the top two US semiconductor stocks.

Nvidia is also expected to bring its 2020 outperformance into 2021, as demand for its products ‘remains strong across some of the most desirable end-markets in semis’, including gaming, artificial intelligence and cloud computing.

As such, the analysts predict that the company’s profits will increase by 2% through 2021. On a longer term basis, earnings per share is forecasted to nearly double from their 2020 level.

What are the stock’s downside risks? What are the stock’s downside risks?

Still, the bull case is not without its downsides, the analysts cautioned.

Thanks to the optimistic Covid-19 vaccine developments of recent weeks, a large number of investors have already begun to move their cash to value stocks away from growth stocks like Nvidia.

If this trend continues, the Nvidia stock could see more capital being pulled out, the brokers added.

Furthermore, the company’s purchase of UK intellectual property provider ARM Ltd in September 2020 also remains hindered by Chinese regulations. Ongoing geopolitical tensions between the US and China could also cause further roadblocks for approvals.

Finally, internal competition - in which Nvidia is rivals with some of ARM’s licensees - might also result in more problems for Nvidia down the road.

The stock currently has 27 ‘buy’ ratings, five ‘hold’ ratings and two ‘sell’ ratings from analysts polled by FactSet.

How to trade NVIDIA with IG

Are you feeling bullish or bearish on the NVIDIA stock?

Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Nvidia Corp> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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