Nvidia (NVDA) has seen its buy rating reiterated by BofA Securities ahead of Wednesday’s results but the investment firm also said that the chipmaker’s recent stock price surge may create a near-term pullback.
“We reiterate Buy/top pick ahead of NVDA Feb-21 earnings but won’t be surprised to see a notable but brief pullback after the recent parabolic run-up in the stock,” the note said.
BofA said, however, that a pullback could be “short-lived” due to updates expected at the upcoming GPU Tech Conference tradeshow, scheduled for March 18 to 21, as well as Nvidia’s “compelling valuation.”
“Expectations have been steadily moving up, with some bullish buy-side estimates for NVDA F4Q/1Q report/guided sales at $21.7bn/$23bn or 9%/7% above consensus, leaving less room for upside surprises,” Bofa said. “However, in our view, any
potential mismatch versus bullish expectations is likely supply (memory, packaging) rather than demand or competition related.”
Nvidia’s “stock appreciation has been parabolic, with the current $1.8Tn market cap putting it only behind Microsoft and Apple in the S&P 500 index,” BofA said.
“We think one interpretation of this NVDA move is a mix of fear and greed and indiscriminate investor chase for all things AI,” the note said. “We acknowledge those factors, but believe it understates the company’s solid execution and EPS revisions.”