Shares of graphics chip developer NVIDIA (NVDA -5.75%) surged on Monday following multiple price target bumps from analysts ahead of the company's second-quarter report. The stock was up about 6.2% at 11:25 a.m. EDT.
Higher price targets came from analysts at Susquehanna and Oppenheimer. Susquehanna boosted its NVIDIA price target from $450 to $540, based on the expectation that NVIDIA's upcoming gaming GPUs will offset any slowdown in data center demand in the second half of 2020. NVIDIA has scheduled an event for Sept. 1 at which it's expected to unveil its newest line of high-end gaming graphics cards.
Oppenheimer isn't quite as optimistic, raising its NVIDIA price target from $400 to $500. Oppenheimer is expecting a strong earnings report driven by data center demand, but like Susquehanna it sees a data center slowdown in the second half of the year. Oppenheimer shares the view that gaming will help offset any weakness in data center business.
NVIDIA has guided for second-quarter revenue of $3.65 billion, plus or minus 2%. The acquisition of Mellanox is expected to contribute a low-teens percentage to the total revenue figure. Analysts are expecting adjusted earnings per share (EPS) of $1.97, up from $1.24 in the prior-year period.
While NVIDIA may be benefiting from a boom in demand for gaming during the coronavirus pandemic, the stock is more expensive than it's ever been by a wide margin. Shares of NVIDIA trade for around 25 times annual sales, far above dot-com bubble levels and extremely optimistic for a semiconductor company . It may take more than solid results on Wednesday to boost the stock further.