Please ensure Javascript is enabled for purposes of website accessibility

Here's Why NVIDIA Stock Popped Today

By Joe Tenebruso - Jun 17, 2021 at 5:41PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Software could be a powerful new growth driver for the semiconductor titan.

What happened 

Shares of NVIDIA (NVDA 1.73%) rose 4.8% on Thursday, following an intriguing new analyst report. 

So what 

After speaking with NVIDIA's chief financial officer, Colette Kress, Jefferies analyst Mark Lipacis repeated his buy rating on the chipmaker's stock and boosted his price forecast from $740 to a Wall Street high of $854.

Lipacis believes investors are underestimating NVIDIA's opportunity to license its new data center software. Yet that could change, Lipacis posits, once the company begins to report its software sales as a separate line item on its income statement.

A rising bar chart.

Investors are excited about NVIDIA's long-term growth prospects. Image source: Getty Images.

Additionally, Lipacis expects NVIDIA's pending $40 billion acquisition of U.K.-based mobile chip specialist Arm Limited to close in early 2022. He also noted the potential for NVIDIA to bring Arm's technology to new markets, including data centers, automobiles, and the Internet of Things.

Now what

Lipacis is right to highlight NVIDIA's software ambitions. Software can be significantly more profitable than computer hardware. And should this emerging business help to improve NVIDIA's overall profit margins, investors will likely be willing to pay a higher price for its earnings.

For his part, Lipacis' new price target is based on a price-to-earnings ratio of 25 on his $50 EPS estimate for the company in 2025. 

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Jefferies Financial Group Inc. and NVIDIA. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
NVDA
$190.32 (1.73%) $3.23
Jefferies Financial Group Inc. Stock Quote
Jefferies Financial Group Inc.
JEF
$35.01 (0.43%) $0.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.