Nvidia stock named 2023 Top Pick at Needham as estimates are closer to bottom

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By Senad Karaahmetovic

Needham & Company analysts have named Nvidia (NASDAQ:NVDA) a Top Pick stock for 2023 after raising the price target on the chipmaker.

The new price target ($230 from the prior $200 per share) sees almost a 40% upside from Friday's closing price. Nvidia stock is also added to Needham's Conviction List.

"As we exit one of the semiconductor industry's most volatile years, investors should focus on companies where both the consensus ests and the end-markets have largely corrected," the analysts said in a client note.

With Nvidia stock down 44% year-to-date and EPS estimates for 2023 already down 31%, the analysts see risks mostly priced in at current levels.

"Unlike other end-markets, NVDA's graphics segment has declined ~30% Y/Y and China data center has declined at a similar rate. We are approaching a bottom in the gaming segment in C1Q23. And while we expect volatility in the overall data center market in CY23, we believe NVDA's customers are upgrading to the latest H100 architecture," they added.

As for the market multiples, the analysts acknowledge that the first half of 2023 is likely to remain choppy with estimates probably coming down more. As far as Nvidia stock is concerned, they argue that estimates "are much closer to the bottom."

"We believe the shares can trade closer to their pre-COVID levels as both Gaming and Data Center growth accelerates in 2H23," the analysts concluded.