Nvidia stock receives a rare downgrade: find out more

July 05, 2024 08:07 AM PDT | By Invezz

Nvidia stock receives a rare downgrade: find out more — Image source: Invezz

New Street’s price target on Nvidia stock

Pierre Ferragu is convinced the upside is rather limited in NVDA after its massive year-to-date rally. His research note reads:

We downgrade the stock to neutral as upside will only materialise in a bull case, in which the outlook beyond 2025 increases materially, and we don’t have the conviction on this scenario playing out yet.

The New Street Research analyst announced a price target of $135 on Nvidia stock today that translates to a 4.0% upside only. Watch here: https://www.youtube.com/embed/Gzt9tS5wuC0?feature=oembed

NVDA remains a quality franchise

Nvidia share price has rallied this year on the back of continued demand for AI chips. The semiconductor stock, however, has inched down a little in recent weeks as investors decided in favour of taking profits.

Ferragu downgraded NVDA shares this morning as he expects it to be difficult for the chip giant to maintain its price-to-earnings multiple at the current 40 times moving forward.

Nonetheless, the “quality of the franchise remains intact”, he told clients in a note on Friday. New Street Research, he added, would be open to loading up on Nvidia stock if it sees “prolonged weakness” in the coming months.

Nvidia shares pay a dividend yield of 0.031% at writing, though.

Nvidia shares were recently split 10-for-1

Pierre Ferragu continues to see Nvidia Corp as the top franchise for AI data centres, but much of the good news, he added, is factored into its current stock price.

For the first time since January 2023, we see expectations for AI semis aligned with capacity planning in the supply chain [and] expansion of demand beyond hyperscalers, implying strong capex revisions towards high-teens capex-to-sales ratios, and aligned with giga-cluster deployment plans.

New Street Research now rates Nvidia stock at “neutral” but a bunch of other leading AI names remain “buy” rated at the investment firm. These include TSMC, AMD, Micron, and Broadcom Inc.

An Nvidia downgrade is a rather rare event in Wall Street in 2024. The only other firm that has downgraded the AI behemoth this year to “hold” is DZ Bank of Germany.

Nvidia stock recently underwent a 10-for-1 split after surpassing $1,000 per share on the back of a strong financial report for its first quarter.

The post Nvidia stock receives a rare downgrade: find out more appeared first on Invezz

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