Nvidia's stock can soar 50% more as earnings power still isn't priced in: HSBC

By Tomi Kilgore

Analyst Frank Lee sees Nvidia's earnings next year rising 45% above Wall Street's current estimate

Shares of Nvidia Corp. pulled back Monday, even as HSBC analyst Frank Lee said that, despite their continued big rally this year, investors are still significantly underestimating the earnings potential of the semiconductor company and artificial-intelligence play.

Lee reiterated his buy rating on the stock, which he's had for the past 13 months, as he boosted his price target to $1,350 from $1,050. The new target implies a 50.6% upside from Friday's closing price of $898.78.

The new target makes Lee the second most bullish on the stock, of the 60 analysts surveyed by FactSet, behind only Rosenblatt Securities' Hans Mosesmann who has $1,400 stock price target.

The stock (NVDA) slipped 0.3% in morning trading Monday, to erase an earlier intraday gain of as much as 1.1%. The pullback comes after it had run up 18% amid a three-week win streak through Friday, and had soared 81.5% year to date.

Lee believes Nvidia will continue to demonstrate its "strong pricing power" via its NVL36/NVL72 server rack systems and GB200 processor platform. And despite the strong gains already seen in the stock, Lee believes Wall Street will still be surprised by the strength over the next year.

For the fiscal first quarter through April, which Nvidia will release results for on May 22 close, Lee expects sales of $26 billion. That compares with the guidance Nvidia provided in February of $24 billion and the current FactSet consensus of $24.45 billion.

Lee also expects current-quarter sales of $28 billion, above the FactSet consensus of $26.48 billion.

For the next fiscal year, which ends January 2026, he sees "significant upside" to earnings, which he believes is still not fully priced in by Wall Street.

He raised his estimate for earnings per share to $45.16, which is 45% above the current FactSet consensus of $31.05, and lifted his revenue forecast to $196 billion, which is 42% above the FactSet consensus of $138 billion.

Of the 60 analysts surveyed by FactSet who cover Nvidia, 53 are bullish and seven are neutral. There are no bears.

The average price target is $1,009, or about 12% above Friday's closing price, but 25% below Lee's target.

Nvida's stock has rocketed 216.3% over the past 12 months, while the PHLX Semiconductor Index SOX has rallied 62.6% and the S&P 500 index SPX has advanced 26.8%.

-Tomi Kilgore

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05-13-24 1025ET

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