On Thursday, Citi maintained a Buy rating on NVIDIA (NASDAQ:NVDA) and increased the price target to $175 from $170. The adjustment follows NVIDIA's recent financial performance, which surpassed expectations. NVIDIA's October-quarter sales reached $35 billion, exceeding the anticipated $34 billion. Additionally, the January-quarter guidance of $37.5 billion aligns with market projections.
The company's management addressed three significant concerns of investors during the earnings call. Firstly, the ramp-up of Blackwell, NVIDIA's latest product, is progressing rapidly, with sales expected to surpass the previous several billion in the January-quarter. Secondly, gross margins are predicted to hit their lowest in the April-quarter and then recover to mid-70s in the second half of the fiscal year. Lastly, the ongoing expansion of AI for pre-training, post-training, and inference time scaling is anticipated to continue driving higher compute demand.
Despite a quarter-over-quarter decline in networking demand, which Citi attributes to optics supply issues, expectations are set for growth in the January-quarter. In light of these factors, Citi has revised its EPS forecasts for fiscal years 2025, 2026, and 2027 upwards by 5%, 4%, and 6%, respectively.
Citi's increased price target of $175 is based on a consistent 35x P/E ratio. The firm has also initiated a positive catalyst watch leading up to the Consumer Electronics Show (CES) in January, where it is expected that Blackwell sales projections will rise and management will discuss the surge in enterprise and industrial demand for robotics, driven by AI inference.
In other recent news, NVIDIA Corporation (NASDAQ:NVDA) has been in the spotlight due to significant financial performance and strategic advancements. The company reported a record-breaking total revenue of $35.1 billion, surpassing the $34 billion expectations. NVIDIA's revenue outlook for the fourth quarter aligns with forecasts at $37.5 billion. The company also anticipates a temporary dip in gross margins due to the early ramp-up of their Blackwell product, but it is expected to recover later in the year.
Analysts from various firms have adjusted their targets for NVIDIA. Deutsche Bank (ETR:DBKGn) maintained a Hold rating, while Morgan Stanley (NYSE:MS), Evercore ISI, and BofA Securities reiterated their confidence in the company's future performance by nudging their price targets to $168, $190, and $190 respectively.
These recent developments underscore NVIDIA's strong financial performance and strategic position within the rapidly expanding AI industry, particularly with the progress of its Blackwell product and the resolution of potential concerns. The company has addressed investor concerns, particularly regarding the scaling of Large Language Models (LLMs), and reassured stakeholders about its production capabilities. NVIDIA's Blackwell production is in full swing, with January quarter shipments expected to surpass previous forecasts.
InvestingPro Insights
NVIDIA's impressive financial performance, as highlighted in the article, is further supported by real-time data from InvestingPro. The company's revenue growth stands at a staggering 194.69% for the last twelve months, with a quarterly growth of 122.4% in Q2 2025. This aligns with Citi's positive outlook and increased price target.
InvestingPro Tips reveal that NVIDIA has a perfect Piotroski Score of 9, indicating strong financial health. This score, combined with the company's impressive gross profit margins of 75.98%, supports Citi's optimistic stance on NVIDIA's future performance.
The article mentions concerns about gross margins, but InvestingPro data shows a robust operating income margin of 61.87% for the last twelve months. This suggests that NVIDIA is maintaining profitability despite potential challenges.
Investors should note that while NVIDIA is trading at a high P/E ratio of 67.04, it's also trading at a low P/E ratio relative to near-term earnings growth, according to InvestingPro Tips. This could indicate potential for further stock price appreciation, aligning with Citi's increased price target.
For those interested in a deeper analysis, InvestingPro offers 22 additional tips for NVIDIA, providing a comprehensive view of the company's financial health and market position.
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