It’s the best performing stock in the last year that Wall Street just can’t catch up to.
Shares of Nvidia are up 194 percent over the last 12 months, but the stock has one of the biggest gaps between Wall Street analysts’ target price and its actual price. According to one portfolio manager, however, the Street may actually have grounds for their more cautious approach.
With the stock sitting around 15 percent above the average analyst price target, Mike Binger of Gradient Investments says there’s a disconnect between how analysts and investors view the stock, which has accounted for the gap.
“Investors see this as a concept or a theme stock, whereas Wall Street analysts see it as part of the semiconductor industry,” he said Tuesday on CNBC’s “Trading Nation.” “So investors consider it an artificial intelligence, driverless car company, and they figure whatever valuation is put on it, the company will grow into that.” Nvidia currently sports a P/E of around 60, rich compared with the S&P 500 technology sector’s overall 24 times multiple.
Wall street analysts, however, “are more putting some kind of industry multiple maybe at the high end of the industry, but still an industry multiple on this stock,” Binger said.
And despite the company’s big earnings beats, Binger believes the Street’s predictions on Nvidia could actually be coming to fruition.
“I think analysts and the company’s trajectory on profits and earnings are starting to converge,” he said. “So at the end of the day, I wouldn’t own it right now, I’d wait for a better entry point.” According to FactSet, of the 37 analysts that cover the stock, the average rating is overweight with a $179.25 price target.
Nvidia was trading 1.8 percent lower, at $208, on Wednesday after hitting an all-time high in the previous session.
The company is set to report earnings after the closing bell on Thursday. Analysts polled by FactSet are expecting the company to earn 95 cents per share on $2.36 billion in revenue.