Despite its 120% growth in 2020, NVIDIA (NASDAQ: NVDA) Is set to give investors more profits in the coming months.
So says Needham analyst Rajvindra Gill. On Tuesday, they reiterated their buy rating on NVIDIA’s stock and raised their price forecast from $ 600 to $ 700. This is about 35% higher than its current price near $ 517.
Gill praised the graphics-card maker’s $ 40 billion deal to acquire Japanese company partner chipmaker ARM Holdings. Softbank, Which he says will enhance his artificial intelligence abilities. “Strategically, we believe the Nvidia-arm combination will build the leading AI computing platform in the semiconductor industry,” Gill said.
Gill, in turn, estimates that acquiring ARMs could increase NVIDIA’s annual earnings per share by $ 1.65 by 2022.
Will NVIDIA’s share price be $ 700?
The merger with ARM will face intense regulatory scrutiny, so currently there can be no assurance that it will be completed. But if it gets regulatory approval, NVIDIA’s combination with ARM will be a game changer for the tech industry. NVIDIA’s pair of AI and graphics processing technology with ARM’s central processing unit design and large device ecosystem will present the combined company as a host of cloud computing, 5G communications, the Internet of Things and other high-growth markets.
In addition, NVIDIA stated that it expects to immediately optimize its profits at the conclusion of the merger, so Gill’s EPS estimate seems reasonable. Adding $ 1.65 to Wall Street’s current earnings estimates for NVIDIA would equal $ 12.67 in EPS in 2022. At $ 700 per share, the Tech Titan will trade at about 55 times those earnings estimates. While wealthy, that valuation is certainly achievable, given that NVIDIA currently trades 57 times ahead of earnings estimates for 2021.