Target price of $730! Analyst: Nvidia is not expensive.
Based on the expected earnings in 2024, Nvidia's projected P/E ratio is approximately 29 times, slightly higher than the average valuation of 23 times for a basket of AI-related stocks.
NVIDIA's stock price hit a record closing price of $487.84 on Tuesday.
Investors are weighing whether NVIDIA's upward momentum can continue, but analysts at Melius Research suggest that the chip manufacturer's stock price may still be undervalued.
Target price of $730
Ben Reitzes of Melius stated that after the astonishing performance of the stock so far this year, a period of adjustment is normal, but the current valuation and prospects should reassure investors by the end of 2023.
He rates the stock as "buy" with a target price of $730, which implies a 50% increase from Tuesday's closing price.
According to FactSet data, based on expected earnings for 2024, NVIDIA's estimated P/E ratio is around 29 times, slightly higher than the average valuation of AI-related stocks at 23 times.
Reitzes wrote, "Based on the adjusted earnings growth in 2024, NVIDIA is 'cheaper' than Alphabet, Microsoft, and Apple."
Reitzes mentioned that conversations with investors indicate concerns about whether the rise of AI concept stocks is forming a bubble and whether the supply and demand of chips are starting to balance.
However, Reitzes stated that NVIDIA seems to be laying the foundation for maintaining its current P/E ratio in the long term, as it has built a software ecosystem and a circular cloud service on top of its hardware foundation. In addition, the company announced a $25 billion stock buyback, which also helps support the stock.
