Why Nvidia stock is ripe for another rally: Investor

On By Littum

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Nvidia ( NVDA ) mania is heating up ahead of the market darling’s Wednesday earnings report.

The company is “representative of the most important stocks in America,” EMJ Capital founder and president Eric Jackson told Yahoo Finance’s managing editor Brian Sozzi on his Opening Bid podcast (listen below; video above).

Jackson reiterated his call that Nvidia’s stock could double in the next twelve months given its wide lead in AI chip production.

“The investments (in AI) are just beginning,” Jackson added. “The need for these chips will still continue for the next year or two or three.”

Nvidia’s stock has risen more than 2,600% in the past five years, according to Yahoo Finance data, driven by one impressive quarter after another as it took the top spot in cutting-edge chips.

The company’s strong performance is expected to continue in its fiscal third quarter — sales and profits are each estimated to be up 83% from a year ago. Wall Street remains positive on its favorite stock.

Of the 63 sell-side analysts covering Nvidia, 59 rate the stock a buy or strong buy, Yahoo Finance data shows. The average price target is $160.38, about 13% above current levels.

“We view near-term risks as broadly balanced and are buyers of Nvidia heading into its fiscal third-quarter earnings report scheduled for Wednesday. Positive set-up indicators from accelerating bookings at cloud service providers, an upward bias on hyper-scale capital spending, as well as our view that near-term estimates will rise after the earnings call,” Evercore ISI analyst Mark Lipacis said in a client note on Monday.

Lipacis says that if Nvidia lets investors down, it would come in the form of slowing revenue growth.

There’s been a whirlwind of activity around Nvidia lately.

In addition to achieving world’s most valuable company status by pushing Apple ( AAPL ) and Google ( GOOG ), Nvidia joined the Dow Jones Industrial Average on November 8. Former chip leader Intel (INTC) was kicked out.

“It’s good that Nvidia is part of the mix now,” Jackson said, noting that could encourage buying by retail investors.

One potential problem is the restrictions on sales to China by the Biden administration and subsequent write-downs, which were a “meaningful part of their quarterly earnings,” Jackson said. “They had to take it down to zero.”

President-elect Donald Trump could also stand firm on the chip issue and live up to his campaign promises regarding China.