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Will Nvidia cross US$500 billion market cap this year?

Bank of America analysts say Nvidia could see sales grow in double digits over the next three financial years.

Nvidia share price target outlook earnings dividends 2020 2021 2022 stocks buy sell long short cfd trade prediction forecast analysts pe ratio Source: Bloomberg

Why is Nvidia’s share price rising again?

Nvidia Corp (NYSE: NVDA), the largest chipmaker in the US by market cap, saw its share price surge 4.5% last Friday 21 August 202.

This latest rally followed the release of the semiconductor company’s Q2 earnings on Wednesday 19 August 2020, in which actual results comfortably exceeded Wall Street estimates.

The company posted a ‘record’ revenue of US$3.87 billion – up 50% year-on-year, and higher than analyst projections of US$3.655 billion.

What does a better-than-expected Q2 mean for the Nvidia stock?

Following the earnings, Bank of America analysts raised their price targets on the Nvidia stock to US$600 from US$520, while reiterating their ‘buy’ rating.

This represents an upside of 17% from Friday 24 August’s closing price of US$513.49 a share.

In their note, the analysts also made an outlandishly bullish prediction, stating that Nvidia will reach a US$500 billion market cap, based on various growth scenarios.

‘Bigger picture, we believe NVDA has an unassailable hardware/software/developer lead in some of the largest and fastest growing markets in semis/tech,’ the researchers wrote.

As such, they raised their profit forecasts for the firm’s 2020, 2021 and 2022 fiscal years by 10%, 14% and 11% respectively.

Despite the optimistic outlook, the brokers did caution that the ‘lumpy’ data centre business, alongside a worsening of US-China trade tensions, also means Nvidia’s path to a half-trillion valuation is not without its challenges.

Meanwhile, Deutsche Bank (DB) is the most bearish of the latest analyst ratings, giving the stock a price target of US$450 and ‘hold’ rating.

DB analysts wrote that while positive fundamental momentum is expected from the Q2 results, they believe that ‘much of this goodness is already reflected’ in NVDA’s share price.

Feeling bullish about the Nvidia stock?

You can start taking a position on the chipmaker’s shares by opening a live or demo IG trading account today.

Nvidia’s Q3 guidance: sales to increase 47%

In its Q2 report, Nvidia also provided the following outlook for the third quarter of fiscal 2021:

  • Revenue is expected to be US$4.4 billion, plus or minus 2%. (This represents a 46.6% increase from Q3 2019’s reported sales of US$3 billion)
  • GAAP (industry standard) and non-GAAP (company adjusted) gross margins are expected to be 62.5% and 65.5%, respectively, plus or minus 50 basis points.
  • GAAP and non-GAAP operating expenses are expected to be approximately US$1.54 billion and US$1.09 billion, respectively.
  • GAAP and non-GAAP other income and expense are both expected to be an expense of approximately US$55 million.
  • GAAP and non-GAAP tax rates are both expected to be 8%, plus or minus 1%, excluding any discrete items. GAAP discrete items include excess tax benefits or deficiencies related to stock-based compensation, which are expected to generate variability on a quarter by quarter basis.

How to trade Nvidia with IG

Are you feeling bullish or bearish on Nvidia shares? 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

The information 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 Bank S.A. 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 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. See full non-independent research disclaimer.

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