© Reuters. Nvidia stock, up 231% YTD, is the best 'budget' AI buy says BernsteinAfter introducing short Tesla (NASDAQ:) stock as its Top Idea for 2024, Bernstein analysts are back with another unorthodox call.
Buy cheap, budget-focused Nvidia (NASDAQ:) stock, which is up more than 230% year-to-date. Bernstein has a $700 per share price target on NVDA stock, which closed at $483.50 yesterday.
Analysts acknowledge that “it feels strange to complain” about Nvidia stock performance this year. However, they also noted that “massive return in the stock has arguably been disappointing (and the shares are actually down a bit over the last month following yet another enormous beat and raise).”
“In fact, while forward estimates have quadrupled this year as generative AI has boomed, multiples have compressed by almost 2/3 during the same period,” they wrote.
They remind investors that NVDA stock now trades in the mid 20’s P/FE, which is the cheapest it has been “since the crypto blow-up at the end of CY2018.”
Moreover, this AI stock is currently trading at a discount to the SOX index, a situation not seen since 2014.
This surprising development positions Nvidia as the most affordable among "AI narrative" stocks, even surpassing Intel (NASDAQ:) in terms of valuation, according to the analysts.
While concerns about sustainability linger, with next year's EPS projections ranging from ~$20 to potentially $25, investors remain cautious, fearing a potential drop in earnings in subsequent years.
“That being said, there is plenty of reason to believe in the story here.”
“We cannot say for sure that NVIDIA will never encounter some sort of air pocket. But we remain very bullish on the long term opportunity in front of them, and continue to believe that in 5 years or 10 years we will all be talking about an industry that is far larger than the numbers being bandied about today,” the analysts added.
“And at current prices NVDA would trade at ~30x on a $15 EPS, which actually doesn’t seem unreasonable if one believed in that future and viewed it as a trough. This stock is, and will always be, volatile, but we think you still should be there.”
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December 15, 2023 at 07:25PM
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