What Happened:
Shares of leading designer of graphics chips Nvidia (NASDAQ:NVDA) jumped 5.24% in the morning session after Wall Street analysts raised their price targets on the company's stock in anticipation of its Q2 2023 earnings on August 23, 2023. KeyBanc analyst John Vinh maintained an Overweight (Buy) rating and raised his price target from $550 to $620. Vinh expects Nvidia's Q2'2023 earnings results to exceed Wall Street's expectations. Similarly, HSBC analyst Frank Lee maintained a Buy rating and raised his price target from $600 to $780, adding, "Demand for AI GPUs is expected to continue to exceed supply." These price target hikes highlight the market's favourable sentiment towards Nvidia and the potential of its AI-based GPUs.
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What is the market telling us:
Nvidia's shares are very volatile and over the last year have had 29 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was seven days ago, when the stock gained 5.64% on the news that the company was named a "Top Pick" by Morgan Stanley in a research note. Analyst Joseph Moore added that "We think the recent selloff is a good entry point, as despite supply constraints, we still expect a meaningful beat and raise quarter - and, more importantly, strong visibility over the next 3-4 quarters." Morgan Stanley has an Overweight (Buy) rating and a price target of $500 per share. The price target implied a potential 22% upside from where shares were traded before the note was released. It's worth noting that in the Q1'23 earnings report, Nvidia pleasantly surprised with their Q2 revenue guidance, surpassing expectations by over 50%. This led to operating profit guidance meaningfully ahead as well.
Nvidia is up 220% since the beginning of the year, and at $457.41 per share it is trading close to its 52-week high of $474.94 from July 2023. Investors who bought $1,000 worth of Nvidia's shares five years ago would now be looking at an investment worth $7,220.
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