The reason behind Nvidia’s recently rare stock downgrade

Nvidia Stock Downgraded to ‘Neutral’ by NewStreet Research

Nvidia, the artificial intelligence powerhouse, received a rare downgrade on Wall Street recently. Analyst Pierre Ferragu of NewStreet Research downgraded Nvidia stock from “Buy” to “Neutral” citing valuation concerns. This downgrade comes after the stock had a remarkable 157% year-to-date rally, leading to limited upside potential in the shares.

While Ferragu has not turned bearish on the stock completely, he believes that the current valuation reflects the stock being fully valued. He has set a one-year price target of $135 and a two-year price target of $143, representing potential upside of 6% and 12% respectively from the current levels. Ferragu emphasized the importance of being cautious, stating that any further upside will rely on a bull case scenario that may increase significantly beyond 2025.

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Despite the downgrade, Ferragu still believes that Nvidia has the strongest AI franchise amongst its competitors. He expressed that the quality of the franchise remains intact, and he would consider buying the stock again but only on prolonged weakness.

It is worth noting that this downgrade contrasts with the majority of Wall Street analysts’ opinions on Nvidia. Data from Bloomberg shows that 89% of the 72 analysts covering the company have rated the stock a “Buy.”

While Ferragu’s price target aligns with the average 12-month price target on the stock, there are bullish predictions as well. Some analysts anticipate Nvidia’s upward trajectory to continue, with one even estimating the stock to almost double to a $6 trillion valuation by the end of the year.

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At Extreme Investor Network, we recommend staying attentive to valuation concerns and analysts’ insights when making investment decisions. The finance world is ever-changing, and having a diversified understanding of different perspectives can help you navigate the market effectively. Follow our updates for more insightful information on finance, investing, and market trends.