Banking giant establishes price target for Nvidia stock

Summary

⚈ Piper Sandler cut Nvidia’s price target, citing potential data center revenue risk.

⚈ Worst-case estimate sees Nvidia falling to $76.25, a 32.72% drop from today.

⚈ Despite concerns, Piper Sandler maintains an Overweight rating and bullish long-term view.

Banking giant Piper Sandler has revised its outlook on Nvidia stock (NASDAQ:NVDA) for the next 12 months.

In a departure from what Wall Street firms usually do, company analysts issued a range instead of a single price target. After conducting a sensitivity analysis of the chipmaker’s data center revenue to determine the potential impacts that a slowdown in capital expenditures (CAPEX) could have, Piper Sandler analyst Harsh Kumar believes that $9.8 billion on an annual basis — roughly 6.45% of the company’s data center revenue, could be at risk.

What’s more, that analysis already excludes revenue from China completely. Per the multinational investment bank, the worst-case scenario could see a $0.40 hit to earnings per share (EPS) — and at a 25x trough multiple that Piper Sandler applies to reach its price targets, this leads to a price target of just $76.25 for Nvidia stock.

For reference, at press time on May 5, NVDA shares were changing hands at $113.34, having marked a 15.6% decline since the start of the year. Accordingly, the worst-case scenario per Piper Sandler would equate to a 32.72% drop from current prices.

However, it’s important to remember that we’re still discussing one specific scenario here — on the whole, the banking giant remains bullish on Nvidia stock. With the risks noted, the banking giant reiterated an ‘Overweight’ rating on NVDA stock, equivalent to a Strong Buy. Per the firm’s best-case scenario, and once again utilizing a 25x multiple, Nvidia stock could reach a price of $126.75.

If such a move to the upside were to come to fruition, it would represent an 11.83% surge from current prices. While the fact that Piper Sandler has remained bullish shouldn’t be discounted, readers should note the large disparity in upside/downside between the best-case and worst-case scenario the firm has laid out.

In addition, this was quite the price target cut — Piper Sandler’s earlier coverage came with a $150 12-month price forecast, which would equate to a 32.34% rally compared to current prices. While analysts have maintained bullish outlooks, there’s a noticeable trend of cutting price targets. The change in sentiment isn’t limited to Wall Street — as the short ratio of Nvidia stock has recently reached a 2-week high.

Featured image via Shutterstock