Following Nvidia's (NVDA 0.22%) presentation at CES 2025, Bank of America analyst Vivek Arya reiterated a bullish view on Nvidia's growth trajectory and stock appreciation potential.
The stock has had a phenomenal run over the last few years, but Arya's price target of $190 implies 35% upside for the shares over the next year or so. Let's see if that estimate is reasonable based on Nvidia's growth and valuation.
NASDAQ: NVDA
Key Data Points
Is the stock a buy?
Nvidia is benefiting from two massive trends right now. One is the transition from general-purpose computing to accelerated computing, which is driving strong demand for Nvidia's graphics processing units (GPUs). The other opportunity is the growing adoption of artificial intelligence (AI) solutions, where Nvidia is developing computing platforms to enable everything from humanoid robotics to autonomous transportation. Consistent with these trends, Nvidia has been growing its business at very high rates in recent years.
However, the AI chip leader won't continue growing annual revenue at triple-digit rates like the last few years. The company's revenue grew 94% in the most recent quarter, down from 122% in the previous quarter, and the Wall Street consensus calls for revenue and earnings per share to increase about 50% in fiscal 2026 ending in January.
Assuming the stock continues to trade at the same forward price-to-earnings (P/E) ratio of 47, the stock could climb to over $200 in the next 12 months, based on forward earnings estimates of $4.43 for fiscal 2026. The analyst is probably banking on Nvidia hitting a similar earnings target and trading close to the current P/E.
But it's also possible that slowing growth could cause investors to pay a lower valuation multiple. If Nvidia trades at 35 times next year's earnings estimate, the stock would trade at $155 this time next year, which isn't much upside over the current $140 share price. Either way, investors should lower their expectations for Nvidia's returns this year.
