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Why NVIDIA Might Keep Running

By Brian D. Pacampara, CFA – Feb 3, 2014 at 10:17AM

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Does this analyst make a good case? Or is it just more noise from Wall Street?

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of NVIDIA (NVDA -1.51%) gained slightly this morning after Susquehanna upgraded the graphics chipmaker from negative to neutral.

So what: Along with the upgrade, analyst Chris Caso boosted his price target to $14 (from $10.50), representing about 11% worth of downside to yesterday's close. While Caso isn't exactly bullish on NVIDIA's appreciation prospects, he thinks that better graphics processing unit, or GPU, trends could stabilize the stock's risk going forward.

Now what: Susquehanna thinks that NVIDIA's risk/reward trade-off, although still not attractive, is certainly improving. "Our most recent checks have noted an improved tone within NVDA's GPU business, mainly due to product shortages by AMD (AMD -1.65%) that are limiting the competitive pressure," noted Caso. "On Tegra, we still hold low expectations for this business, but after a year of estimate reductions, Street estimates are down sharply as well." When you couple those improved trends with NVIDIA's reasonable forward P/E of 20, I'd agree that stock is at least worth looking into.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Nvidia. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Nvidia Stock Quote
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