Analyst: Compared to other tech giants, Nvidia is still "too cheap," with a target price of $730.

The stock price of the chip giant, NVIDIA, has surged by 240% this year. Prior to the release of NVIDIA's earnings report, many people thought that the stock price was "too expensive."

However, after NVIDIA announced its explosive performance, Ben Reitzes, an analyst at Melius Research, pointed out that NVIDIA's current stock price is considered "cheap," at least relatively speaking.

Reitzes noted that NVIDIA's stock price reached a new all-time high at the close of trading on Tuesday. It is trading at 28 times its projected earnings for 2024, while the average expectation for AI-related stocks is 23 times. Moreover, this multiple is also lower than that of companies such as Amazon, Adobe, and Microsoft.

Reitzes is quite optimistic about NVIDIA's future performance. He believes that the company has the potential to increase its gross margin and highlights the strong demand for the L40S graphics card, which will attract AI server manufacturers and their customers who are driving the development of next-generation applications.

Therefore, he has upgraded NVIDIA's stock rating to "buy" with a target price of $730, implying a 48% upside from the current stock price.

Furthermore, Reitzes believes that NVIDIA is not just a hardware company. It has the ability to sustain earnings per share of over $20 in the long term, just like what Apple did after its rapid growth phase.

He is not surprised that NVIDIA's stock price did not experience a significant increase after the earnings report. Considering that NVIDIA's stock price has already risen by over 200% this year, Reitzes believes that as the market gradually "digests" this information, the stock may regain its growth momentum by the end of the year and even provide some support for its valuation.