Call of the week: Buy Nvidia, shares are set to rally

Seana Smith

It’s a bull versus bear battle over one of the Street’s hottest stocks, Nvidia. The chipmaker’s stock, which more than tripled in value in 2016, has rallied about 225% over the past year compared to the S&P 500’s 15% return. Now there’s a disagreement about where shares are headed next. Bank of America and Citi both think there’s still plenty of upside ahead, while Citron Research is calling for a significant drop.

Bank of America raised its price target on the chipmaker to a Street high of $185 a share, topping Citi’s previous Street-high call on Thursday by $5 a share. Both banks think the progress the chipmaker has made revolutionizing its business will continue to pay off.

In a research note on Thursday, Citi analyst Atif Malik wrote, “Nvidia continues to transform itself from a PC to a diversified gaming, data center and auto software platform and is benefiting from secular trends such as VR/AR, deep learning, AI and autonomous driving.” Malik also made a bullish case for the stock, saying its value could double over the next year to $300 a share.

Bank of America analyst Vivek Arya echoed Malik’s comments, noting that he expects strong upside to the Street’s second-half and 2018 estimates, driven by demand for its graphics processing units (GPUs). Arya’s previous price target on Nvidia was $155.

But it’s not just the bulls that are having an impact on Nvidia’s stock this week. Well-known short-seller firm Citron Research, which is run by Andrew Left, poured cold water on Nvidia’s rapid rise. The firm tweeted Friday that Nvidia’s stock will drop almost 20% before trading near the Street-high targets.

Nvidia has a total of 18 buy, 12 hold and five sell ratings on the stock, according to Bloomberg.