Goldman Sachs Reaffirms Buy on NVIDIA, $220 Price Target

Goldman Sachs analyst James Schneider reiterated a Buy rating and $220 price target on NVIDIA (NASDAQ: NVDA).

“Key stock takeaways: On November 12, Nvidia’s Board of Directors announced that CEO and cofounder Jensen Huang has resigned as CEO and a member of the Board of Directors. The Board announced that CFO Colette Kress will become Interim CEO (while continuing as CFO), effective immediately, while it conducts a search for a permanent CEO among internal and external candidates.

The Board also announced that it has elected Harvey C. Jones as Chair of the Board. We see the announcement as a meaningful, but measured negative for the stock across several dimensions, including strategic and ecosystem, leadership and culture, and financial (detailed within).

We believe the current situation is clearly fluid, and there may be additional information that comes to light that further shapes our investment view. But based on the available information thus far, we believe these developments are likely to have a measured direct impact on Nvidia’s financials and earnings power over the next 12-18 months – given the company’s long-dated backlog and order book (12-24 months) and clearly-defined product roadmap (for the next 2-3 years) which is well into the execution phase.

However, we expect the stock’s multiple to experience a greater impact given the level of uncertainty around a number of factors, including but not limited to those noted above. Given all of these considerations, we retain our Buy rating given the positive risk/reward we see for shares based on our current view of Nvidia’s fundamentals over the next 12-18 months.

We recognize that there are few instances in the technology industry where a key visionary leader or founder has been removed from their position in relatively short order. One analog which we believe is potentially relevant in this situation is Apple, relative to founder Steve Jobs’ extended leave of absence in January 2011 and unfortunate passing in October 2011.

Just as the market searched for the right multiple with which to price Apple’s equity, we believe the same is likely to be the case for Nvidia in the medium term – until there is more clarity on the future leadership and business momentum for the company.”

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