On Sunday, HSBC analyst Frank Lee adjusted the price target for NVIDIA (NASDAQ:NVDA) shares, bringing it down to $185 from the previous target of $195. Despite the reduction, the analyst maintained a Buy rating on the stock. Lee's assessment came with the perspective that NVIDIA may face challenges in the first half of fiscal year 2026, necessitating a robust second-half performance to meet market expectations.
According to InvestingPro data, NVIDIA maintains impressive financial health with a perfect Piotroski Score of 9, while delivering extraordinary revenue growth of 152% in the last twelve months.
The revision was primarily due to a lowered forecast for datacenter revenue in fiscal year 2026, which Lee now sets at $236 billion, down from the initial $253 billion estimate. This projection is based on the expectation of 35,000 NVL 72 equivalent AI server racks, a decrease from the previously assumed 41.5 thousand racks. However, even with this revised estimate, HSBC's forecast remains 28% higher than the Visible Alpha consensus forecast of $184 billion. With a market capitalization of $3.33 trillion, NVIDIA remains a dominant force in the semiconductor industry.
Lee also provided insights into bear-case scenarios, indicating that if NVIDIA were to deploy only 20,000 to 25,000 NVL racks in fiscal year 2026, the earnings per share (EPS) would still be 8% to 14% above the consensus estimate of $4.50. Despite a 6% cut in the fiscal year 2026 EPS estimates to reflect a slower ramp-up of the Blackwell platform in the first half, HSBC's projected EPS of $5.74 still stands 28% above the consensus.
The analyst's decision to lower the target price while maintaining the same target fiscal year 2026 price-to-earnings ratio of 32x is a reflection of the revised EPS forecast. Lee's commentary underscores the pressures NVIDIA may face in delivering a strong performance in the latter half of fiscal year 2026 to align with the expectations set forth.
InvestingPro analysis reveals over 15 additional key insights about NVIDIA's valuation and growth prospects, available in the comprehensive Pro Research Report. The company's next earnings report is scheduled for February 26, 2025.
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In related developments, NVIDIA Corporation (NASDAQ:NVDA) has been reaffirmed with a Buy rating by both Truist Securities and BofA Securities. Both firms cited NVIDIA's dominant position in the artificial intelligence (AI) sector and its significant growth in the gaming industry. NVIDIA's revenue growth of 152.44% over the last twelve months was highlighted, as well as its partnerships with Uber (NYSE:UBER) and Toyota (NYSE:TM) for autonomous driving.
Bernstein also maintained an Outperform rating on NVIDIA, praising the company's impressive year-over-year revenue growth and industry-leading gross profit margin. Additionally, Bernstein outlined its Technology strategy for 2025, recommending a market-weight stance on tech stocks with a slight inclination towards positivity. The firm anticipates that tech's relative performance will largely depend on developments and perceptions surrounding AI and NVIDIA's progress.
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