[ad_1]
What happened
Graphics chip maker (and crypto-mining) actions NVIDIA (NASDAQ: NVDA) fell for a third day in a row Thursday, falling 4% as of 1:25 p.m. EDT despite increasing its price target from Wall Street Bank Mizuho.
And you can probably blame the cryptocurrencies for it.
Image source: Getty Images.
So what
As StreetInsider.com reported this morning, Mizuho Securities reiterated its “buy” rating on NVIDIA and raised the semiconductor share price target to $ 900 per share.
Now that NVIDIA has been trading below $ 800 over the past couple of days, you might think that would be good news and help increase inventory, especially with Mizuho commenting that the demand for gaming consoles and PCs The game seems “strong” in the second half of fiscal 2021. The problem is that one of the main factors supporting NVIDIA’s business (and its share price) in recent years has been demand for its chips. intended for use in machines that mine cryptocurrencies such as bitcoins (CRYPTO: BTC). And in case you haven’t noticed, cryptocurrency prices have been in a bit of a rut for the past couple of months.
Now what
To his credit, Mizuho responds to this objection in his memo, acknowledging the fall in the prices of bitcoin and Ethereum (CRYPTO: ETH) and pointing out that a recent shift from the “proof of work” to “proof of stake” requirement for generating Ether coins “makes GPUs less necessary for mining Ethereum crypto” – which could decrease demand for NVIDIA chips.
Nonetheless, citing a “rebound” in Chinese chip demand and game demand trends, the banker is increasing its revenue and profit forecast for NVIDIA in each of the coming second and third fiscal quarters, and for the next fiscal year. the whole of fiscal year 2022 and 2023 as well. Mizuho now sees NVIDIA earning up to $ 16.12 per share this year and $ 17.70 next year.
Either way, and even taking Mizuho’s projections at face value, at a projected valuation of almost 43 times forward earnings and a short term earnings growth rate of 10%, I think I’m going to have to side with the skeptics on this one. NVIDIA stock seems overpriced, and the investors selling it today… are making the right choice.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
[ad_2]
Source link