Undervaluation is difficult to withstand the risk of management changes! Bernstein maintains a wait-and-see stance on Nvidia (NVDA.US) with a target price of $200

The Zhitong Finance App learned that after Nvidia (NVDA.US) announced the resignation of Huang Renxun as CEO and director, Bernstein, a well-known Wall Street investment bank, released the latest research report saying that although Nvidia's current stock valuation is at a very attractive level, and management changes are not expected to have a clear impact on the company's short-term business, there is still considerable uncertainty about subsequent developments and whether the new CEO can continue the business strategy under Wong In-hoon's leadership. As a result, the bank maintains Nvidia's “in sync with the market” rating and a target price of $200.

Nvidia's board of directors announced on November 12 that Huang Renxun's resignation as president, CEO and director of the company is effective immediately. The current CFO, Colette Kress (Colette Kress), has been appointed interim CEO and will continue to serve as CFO. At the same time, the board will look for a permanent CEO from within and outside the company.

Additionally, Harvey C. Jones, who has been a director of Nvidia since 1993, has been Chairman of the Board of Directors. Nvidia will still release its latest quarterly earnings report on November 17 as originally planned. This announcement of management changes was not accompanied by any performance forecasts.

Bernstein analyst Stacy Rasgon said that on the positive side, Kress should be able to maintain Nvidia's normal operations at this stage, and the bank is not particularly concerned that the events of the past week will have an impact on the company's short-term business. Meanwhile, after experiencing a recent sharp correction in stock prices, Nvidia's valuation appears to be very cheap.

However, Rasgon pointed out that the market still has to face two important uncertainties. On the one hand, follow-up news and related investigations surrounding this management change may continue to influence investor sentiment; on the other hand, it remains to be seen whether the new CEO can actually succeed Huang Renxun and continue his central role in Nvidia's long-term development.

Bernstein believes that Wong In-hoon is not only deeply involved in defining Nvidia's business development direction, but also plays a critical role in the company's relationships with customers, suppliers, employees, and the broader semiconductor and artificial intelligence industry ecosystem. This means that even if Nvidia's short-term business operations remain stable, long-term leadership transitions may still bring uncertainty to the company's strategic execution and industrial cooperation.

Rasgon said it was these uncertainties that prompted Bernstein to switch to a wait-and-see position on the evening of November 11. Although the bank hopes to be optimistic about Nvidia again in the future, it is still difficult to recommend investors to enter the market to buy this stock at this stage.

Notably, Bernstein's cautious approach to Nvidia does not mean that the bank is underestimating the growth prospects for artificial intelligence (AI) and data center businesses. Conversely, its latest financial forecasts still show that Nvidia is expected to achieve strong revenue and profit growth in the next few years.

According to Bernstein's forecast, Nvidia's 2027 revenue will increase 88.4% year over year to 406.898 billion US dollars, and the 2028 fiscal year revenue will further increase 69.6% to 690.258 billion US dollars. Revenue for the 2029 fiscal year is expected to reach 954.114 billion US dollars, approaching the 1 trillion US dollar mark.

Among them, the data center business will continue to be the core engine driving Nvidia's performance growth. Bernstein predicts that the business will increase 95.2% year-on-year to US$378.269 billion in fiscal year 2027, increase 73.9% to US$657.798 billion in fiscal year 2028, and is expected to reach US$918.189 billion in fiscal year 2029, accounting for more than 96% of the company's overall revenue.

In terms of earnings, Bernstein expects Nvidia's adjusted earnings per share for fiscal year 2027 to reach $9.20, and further increase to $15.80 and $22.28 for fiscal 2028 and 2029, respectively. The bank expects Nvidia's adjusted gross margin to remain high at 72.5% for the 2028 fiscal year, and the adjusted operating margin will reach 65.2%.

Regarding the upcoming results for the third quarter of fiscal year 2027, Bernstein predicts that Nvidia's revenue will increase 90.1% year over year to US$108.39 billion, of which data center business revenue will increase 97.2% year over year to US$101 billion, and adjusted earnings per share are expected to be US$2.47.

Judging from the valuation, based on Nvidia's closing price of $173.73 on November 11, the price-earnings ratio corresponding to Bernstein's adjusted earnings per share forecast for fiscal year 2027 and fiscal year 2028 is about 18.9 times and 11 times, respectively.

However, although Nvidia's profit growth prospects are still strong, Bernstein made conservative assumptions during the valuation. Based on Nvidia's average adjusted earnings of 19.04 US dollars per share for fiscal year 2028 and fiscal year 2029, the bank estimated a price-earnings ratio of about 11 times, and arrived at a target price of 200 US dollars. There is still room for potential increase of about 15% from the closing price on November 11.

Bernstein stressed that the market opportunities facing Nvidia in the data center sector are still huge, but the uncertainty brought about by management transitions and related investigations may continue for quite some time. In this context, even though the current stock valuation is already quite low, the bank still tends to wait for more information to be clear before re-evaluating Nvidia's investment opportunities.