Nvidia shares just closed at a record-high — and there’s more momentum ahead, according to Melius Research. “Dare we say Nvidia is now cheap?” analyst Ben Reitzes wrote in a note dated Tuesday. “One of our sources of (friendly) frustration before the F2Q24 call was when we heard that Nvidia was far too expensive. Well not after F2Q24 revisions, and especially not when you adjust for growth,” Reitzes said. “We cover a diverse basket of AI-related stocks and Nvidia is now trading at only a modest premium to the group on a PE basis,” he added. According to the analyst, Nvidia is currently trading at a cheaper valuation than shares of Alphabet, Microsoft and Apple, based on enterprise value-to-sales ratios. Reitzes has a buy rating on Nvidia shares. His price target of $730 suggests nearly 50% upside potential. To be sure, Reitzes admitted “some consolidation” could be seen in the shares after their 233.8% year-to-date rally. However, he forecasts Nvidia regaining some momentum into the year-end as digestion occurs — with its valuation able to provide some support. “We would also point out that Nvidia is laying the groundwork with attributes that could warrant a high 20’s multiple long-term, much like Apple did after its rapid growth phase to be considered much more than a hardware company,” said Reitzes. “These attributes include 1) shepherding a software ecosystem that fosters development on their platform, 2) building a recurring cloud services and software business at scale, and 3) show[ing] a willingness to employ massive buybacks ($25 billion that was just authorized is just the start in our view),” the analyst added. Shares inched down 0.4% Wednesday premarket, after rising more than 4% the prior trading session to a record close. —CNBC’s Michael Bloom contributed to this report.
