Returns as of 03/08/2022
Returns as of 03/08/2022
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Shares of Nvidia ( NVDA 2.33% ) stock fell off a cliff Monday morning, tumbling 4% by noon ET. That’s actually a bit surprising though, given the news today:
Goldman Sachs just reinitiated coverage of Nvidia.
Image source: Getty Images.
What’s more, Goldman Sachs didn’t even diss the stock — to the contrary, Goldman kind of likes Nvidia.
“We continue to view Nvidia as an industry leader in accelerated computing,” said the analyst, “and expect the proliferation of [artificial intelligence and machine learning] to drive earnings growth and a valuation multiple that exceeds the industry average over the long-run.”
Furthermore, Goldman sees a possible “positive catalyst for the stock” in Nvidia’s upcoming annual Graphics Technology Conference (GTC 2022) to be held from March 21 to March 24. “We expect management to unveil new products and provide more detail on its expanding SAM,” said Goldman in a note covered by StreetInsider.com.
All that being said, Goldman Sachs warned that that at its current share price of $219 and change, “risk/reward on the stock is fairly balanced on a 12-month basis.”
For this reason, Goldman declined to recommend the semiconductors star, assigning Nvidia only a $245 price target and a neutral rating. Moreover, the company didn’t give even a hint of being interested in changing its mind (or its rating) on Nvidia in the near future, saying instead, “We await normalization in consumer GPU demand and/or a better entry point before turning more constructive on the stock.”
And sad to say, I have to agree with Goldman Sachs on this one. Although it’s true that Nvidia stock has gotten a lot cheaper — losing about a third of its value over the last three months — at a stock price currently 63 times trailing earnings, Nvidia still looks too expensive based on its projected 21% long-term annual earnings growth rate.
Simply put: A price-to-earnings growth ratio of 3 is too high a price to pay — even for Nvidia.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 03/08/2022.
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Calculated by Time-Weighted Return since 2002. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns as of January 1, 2021.
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