Benefiting from the current boom in artificial intelligence, semiconductor company Nvidia (NVDA 1.17%) was arguably the hottest stock on Wall Street in 2023. Even more impressive, it's off to an explosive start in 2024 as well. Helped by a big move higher this week, when the company reported a 265% year-over-year growth in fiscal fourth-quarter revenue, shares are now up more than 55% year to date as of this writing.
But here's the crazy thing: In response to Nvidia's better-than-expected quarterly results, well over a dozen analysts have raised their 12-month price targets for the growth stock to levels well beyond where shares are trading now. Indeed, several analysts have raised their price targets for the stock to levels of $1,000 or higher.
Let's see what has some of the most bullish Nvidia analysts on Wall Street so upbeat.
NASDAQ: NVDA
Key Data Points
The path to $1,000 and beyond
One of the most-cited reasons analysts are optimistic about Nvidia stock following its latest earnings report is management's guidance. The company said it expected fiscal first-quarter revenue of about $24 billion -- more than $2 billion more than what the consensus analyst forecast was.
KeyBanc analyst John Vinh raised his 12-month price target on the stock from $740 to $1,100. His optimism, like analysts at Bernstein and Benchmark (analysts who raised their price target for Nvidia shares to $1,000 after the earnings report), was based on the company's incredible momentum, shown by its explosive sales growth in fiscal Q4 and management's fiscal first-quarter guidance.
Further, Vinh praised the company's surging sales in its data center specifically. Data center revenue rose 27% sequentially and a whopping 409% year over year in fiscal Q4.
In the company's fiscal fourth-quarter earnings release, Nvidia CEO Jensen Huang said demand for its data center products was coming from various industries. "Our Data Center platform is powered by increasingly diverse drivers -- demand for data processing, training, and inference from large cloud-service providers and GPU-specialized ones, as well as from enterprise software and consumer internet companies," Jensen explained. Even demand from auto, financial services, and healthcare industries "are now at the multibillion-dollar level," he added.
Nvidia stock isn't for everyone
Combining a staggeringly good fiscal fourth quarter with management's guidance for fiscal first-quarter revenue to increase by about $16.8 billion year over year, it's easy to see why analysts are upbeat about the stock. But does this mean investors should still be piling in at the stock's current price?
Sure, with Nvidia's earnings per share in fiscal 2024 soaring 586% to $11.93, the stock deserves to trade at a high valuation. Even more, the stock's current price-to-earnings multiple of 65 actually sounds quite reasonable for a stock with earnings growing this fast.
Despite these factors providing some support for the stock's current valuation, there's one looming concern that should keep investors on their toes: Much of the demand for Nvidia's data center products is driven by surging interest in generative artificial intelligence (AI). Not only is this a new technology that is incredibly difficult to predict, but it's tough to know what sales trends surrounding it will look like after this initial demand boom moderates at some point in the future when the industry for these products matures.
On a similar note, competition in the space could prove more adept than expected. This wouldn't be the first time Wall Street underestimates competition. Few would have guessed 20 years ago that Intel would fall from grace and be surpassed in size by multiple competitors.
Based on Nvidia's guidance for fiscal Q1 revenue and comments from management during the earnings call about some key products remaining supply constrained, there's no sign yet of a pullback in sales on the horizon. But this is a risk investors should be aware of.
For this reason, investors should tread carefully when reading about analysts' rosy 12-month price targets for the stock, opting to do their own due diligence and focus on the long term. Sure, maybe the stock is worth its current price tag. But it's OK to stay on the sidelines if you're unsure about the company's future. There are plenty of other stocks to consider.
