Nvidia (NASDAQ:NVDA) stock closed 17.16% higher on March 24 and ended the trading day at $249.18. The stock was trading 21.2% below its 52-week high of $316.32 and 87.9% above its 52-week low of $132.60. At Tuesday’s closing price, Nvidia’s market cap was $152.5 billion. The stock has fallen 7.7% this month as of Tuesday amid the coronavirus outbreak. Meanwhile, the stock has risen around 6% year-to-date.
Why did Nvidia stock rise?
On Tuesday, Needham upgraded Nvidia stock amid the coronavirus pandemic. Needham analyst Rajvindra Gill upgraded the stock to “buy” from “hold.” Gill reiterated the target price of $270, which is at a premium of 8.4% to the current price of $249.18. Needham upgraded Nvidia stock to “hold” from “underperform” in January. Apart from Nvidia, another chip giant also received an analyst upgrade yesterday amid the coronavirus outbreak. Goldman Sachs analyst Toshiya Hari upgraded Intel (NASDAQ:INTC) stock to “neutral” from “sell.”
The Needham analyst expects Nvidia to gain amid the coronavirus outbreak. Gill expects higher demand for graphics-processing-units technology in the near term. Currently, people around the world are working from home to reduce spreading the coronavirus. Gill also expects the spending environment to improve through 2020.
According to a MarketWatch report, “There has been an increase in demand for both the public and private clouds.” The analyst also pointed to Nvidia’s strong balance sheet. He said that its “net cash will remain the second highest in the industry at $2.0 billion,” after the Mellanox (NASDAQ:MLNX) deal closes. Notably, the company has already received approval from European Union antitrust and Mexico to acquire Mellanox for $6.8 billion. However, the Nvidia and Mellanox deal still needs approval from China, which seems complicated in the current scenario.
Is growth momentum sustainable?
Nvidia is poised to grow on the back of its gaming and data center business in 2020. The company can be a “good buy” amid the stock market crash in 2020. In the fourth quarter, Nvidia’s gaming revenues rose by 56.3% YoY to $1.49 billion. The data center segment sales rose by 42.6% YoY to $968 million in the fourth quarter.
Nvidia also has a strong balance sheet. As of January 26, 2020, the company’s cash and cash equivalents were $10.9 billion—higher from $7.4 billion in the same period last year. In fiscal 2020, Nvidia’s operating cash flow was $4.7 billion—an increase of 27.2% YoY. The company has also been regularly paying dividends to its shareholders. On March 20, the company paid its regular cash dividend of $0.16 per share to all shareholders as of February 28.
For fiscal 2021 (year ending in January), analysts expect Nvidia to have sales growth of 20.2% to $13.1 billion. They also expect an EPS growth of 33.4% to $7.72 based on consensus estimates.
Analysts’ recommendations on Nvidia stock
Among the 41 analysts covering Nvidia stock, 32 recommend a “buy,” six recommend a “hold,” and three recommend a “sell.” Analysts have given Nvidia a consensus target price of $296.43, which implies a 12-month return potential of 19%. Currently, Nvidia stock isn’t overbought or oversold. The stock has a 14-day relative strength index score of 51.80.