NVIDIA (NVDA) PT Raised to $700 at Susquehanna on 'White Hot' GPU Demand, Sees 'Beat and Raise' Forthcoming

February 22, 2021 6:19 AM EST
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(Updated - February 22, 2021 9:02 AM EST)

Susquehanna analyst Christopher Rolland notes that the demand for GPUs remains "white-hot", paving the way for Nvidia (NASDAQ: NVDA) to report a beat-and-raise on Wednesday, February 24.

As a result of these expectations, Rolland raised the price target on NVDA to $700.00 per share from the old $625.00 and maintained a “Positive” rating on the stock. The new price target matches a "Street High."

“From a high level, we expect another beat-and-raise quarter as continued stay-at-home dynamics, Ampere gaming ramp, and a resurgence in crypto-mining drives GPU demand to all-time highs. When we last spoke to management in mid-January, they were excited about a great holiday season and were insistent that any supply shortage is a product of the stronger than expected demand environment. We note NVIDIA’s dual-manufacturing strategy (both TSMC and Samsung) will serve as a distinct advantage in a time of increasing industry-wide supply constraints,” the analyst said in today’s note sent to clients.

Rolland says that strong demand for GUPs is seen by graphics card shortages, paving the way for NVIDIA-based cards selling for a +90% premium on average in the retail aftermarket (premium up +15% since December). Moreover, Nintendo’s upgraded forecast for Switch consoles will also help the company.

“For Data Center, Intel’s better than feared results point to potential upside for NVIDIA (Intel DCG was up +3.1% QOQ in 4Q20, while the Street expects NVIDIA’s DC to be down -2.5%). On top of strong results across the industry this earnings season, we consider the set-up into NVIDIA’s print to be quite favorable, as: 1) consensus estimates for C4Q20/1Q21 of +2%/-7% QOQ are -500bps below typical seasonality of +7%/-2%; and 2) NVDA has underperformed the SOX by -1350 bps since its last print (perhaps lowering the bar),” he adds.

The global shortage of chips is likely to hit NVDA as well, an issue that is likely to persist through the first quarter. Still, Rolland reiterates his expectations of a “very strong” report on Wednesday.

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