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Nvidia’s stunning stock rally could continue to $150 per share, UBS said.
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Recent supply chain checks show “very strong” demand for Nvidia’s next-generation chips, the bank said.
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Nvidia’s potential EPS of $5 in 2025 would give it a valuation of 25.6x on a forward price-to-earnings basis.
Nvidia Samsung shares are expected to continue rising as it benefits from strong demand for its next generation of AI-enabled chips, according to UBS.
The bank raised its 12-month price target on Nvidia shares to $150 per share from $120 per share in a note on Monday, representing a potential upside of 16% from current levels.
Based on recent supply chain checks, UBS analyst Timothy Arcuri said, “Demand momentum for Blackwell’s large-scale systems remains very strong.”
Blackwell is Nvidia’s next generation AI-powered GPU system This chip will replace the very popular H100 chip later this year. It is expected to deliver significant efficiency gains over the Hopper chip, and is being looked at by cloud computing developers.
“We now believe that earnings per share of around $5 are possible by 2025, as the order pipeline for NVL72/36 systems is significantly larger than it was just two months ago with significant corporate balance sheets set to be consolidated by 2025,” Arcuri said.
If Nvidia were to generate $5 per share in earnings next year, it would trade at a forward P/E ratio of about 25.6x. Given the company’s rapid growth rate, that wouldn’t be a difficult valuation since the S&P 500 is trading at a forward P/E multiple of 21x.
Here lies the big difference between Arcuri’s estimates and the rest of Wall Street.
Sell-side consensus estimates are for Nvidia to generate earnings per share of $3.62 in 2025, giving it a forward price-to-earnings multiple of 35x.
“Given all of this, we believe our $150 price target on the stock is supportable and we maintain our ‘Buy’ rating while moving our valuation basis forward from 2025 EPS to 2025/2026 EPS,” Arcuri said.
This also bodes well for further gains for Nvidia. The growing “wall of concern” surrounding the stock in recent weeks. This is expected to eventually lead to further gains, as bearish concerns turn to bullish expectations amid strong earnings results.
“Sentiment towards the stock – while still strong – has faded somewhat in recent weeks, creating more of a ‘wall of worry’ that should eventually be healthy if our forecasts come to fruition,” Arcuri said.
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