Could Nvidia’s Stock Pull Back In 2018?

by Trefis Team
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Our price estimate for Nvidia (NASDAQ:NVDA) stands at $180, which is meaningfully below the current market price of $230. Last year was an excellent one for the company, as its stock price grew from nearly $106 to more than $190, and the momentum spilled over into January 2018. The reason – strong growth acceleration across both the Tegra and GPU product lines, driven by demand for high-end graphics cards and expansion in the data center segment. Will the stock move further up in 2018, or will there be a correction?

Nvidia itself acknowledged that the tailwind of cryptocurrency mining is likely to dampen in 2018. This is one factor that drove Nvidia’s GPU sales last year. In addition, we believe that Intel has recognized that cloud and data centers are increasingly focusing on artificial intelligence and machine learning. Therefore, Nvidia’s growth in the data center segment could slow down somewhat going forward. As a result, we believe that market may be overvaluing the company. We have created an interactive valuation calculator dashboard using Trefis’ interactive technology where you can modify inputs such as P/E multiples and fundamental factors determining Nvidia’s 2018 earnings, and come up with your own forecasts and valuation estimate for the company.

Our base case gives a $180 price estimate for Nvidia. We forecast Nvidia’s earnings (GAAP net income) for 2018 to hit nearly $3.7 billion. We expect double digit growth for both Tegra Processors and GPU segments. If you have a different view, go to our interactive valuation calculator dashboard and modify the assumptions (blue dots) to come up with your own price estimate for Nvidia.

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