Mizuho says NVIDIA is worth $900. Investors disagree.
What happened
Shares of graphics (and crypto-mining) chipmaker NVIDIA(NASDAQ:NVDA)tumbled for a third straight day Thursday, falling 4% in 1:25 p.m. EDT trading despite getting a boost in its price target from Wall Street bank Mizuho.
And you can probably blame thecryptocurrenciesfor that.
So what
AsStreetInsider.comreports this morning, Mizuho Securities reiterated its "buy" rating on NVIDIA and upped the price target on thesemiconductor stockto $900 a share.
Now with NVIDIA trading below $800 for the past two days, you might think that would be good news and would help to lift the stock, especially with Mizuho commenting that demand for both gaming consoles and gaming PCs looks "strong" in the second half of fiscal year 2021. The problem is, one of the biggest factors supporting NVIDIA's business (and its stock price) in recent years has been the demand for its chips for use in machines mining cryptocurrencies such asbitcoin(CRYPTO:BTC). And in case you haven't noticed, cryptocurrency priceshave been in a bit of a rutthe past couple of months.
Now what
To its credit, Mizuho addresses this objection in its note, acknowledging the slump in prices of both bitcoin andEthereum(CRYPTO:ETH)and pointing out that a recent shift from requiring "proof of work" to "proof of stake" to generate Ether coins "makes GPUs less necessary for Ethereum crypto mining" -- potentially diminishing demand for NVIDIA's chips.
Nevertheless, citing a "rebound" in Chinese demand for chips and the trends in gaming demand as well, the banker is increasing its revenue and earnings predictions for NVIDIA in each of the upcoming second and third fiscal quarters, and for all of fiscal 2022 and 2023 as well. Mizuho now sees NVIDIA earning as much as $16.12 per share this year and $17.70 next year.
Be that as it may, and even taking Mizuho's projections at face value, at a projected valuation of nearly 43 times forward earnings and a near-term earnings growth rate of 10%, I think I'm going to have to side with the skeptics on this one.NVIDIA stock looks overpriced, and the investors selling it today ... are making the right call.
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