Nvidia (NASDAQ: NVDA) continues to experience remarkable growth, with its share price soaring over 150% this year following a substantial 240% gain in 2023. Despite its impressive performance and a massive 262% year-over-year sales increase in the first quarter, one analyst recently downgraded Nvidia stock.
NewStreet Research analyst Pierre Ferragu, who previously recommended Nvidia as a buy, downgraded the stock to neutral. His primary concern revolves around Nvidia’s valuation, which he believes has reached a level where further significant upside potential may be limited. Ferragu indicated that additional upside would require a bullish scenario, for which he lacks conviction at this time.
This cautious stance on Nvidia’s valuation is shared by prominent finance professor Aswath Damodaran, who suggests the stock could be overvalued by nearly 50% following its recent surge.
However, Ferragu maintains a one-year price target for Nvidia at $135, slightly above the current share price, and a two-year target at $143, suggesting modest upside potential of approximately 9%. He remains optimistic about Nvidia’s business fundamentals, emphasizing that the company’s franchise quality remains strong. Ferragu indicated a willingness to reconsider buying Nvidia on sustained weakness.
Following Ferragu’s downgrade, UBS analyst Timothy Arcuri countered with a more bullish outlook, raising his 12-month price target to $150 from $120 and maintaining a buy recommendation. Arcuri’s optimism stems from robust demand expectations for Nvidia’s upcoming Blackwell platform.
Overall, Wall Street analysts remain divided on Nvidia’s future prospects, with a consensus average 12-month price target of approximately $129.53. While some echo Ferragu’s caution about valuation, others, like Arcuri, see substantial growth potential ahead based on anticipated demand trends and new product launches.
