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Nvidia stock was downgraded to ‘neutral’ by NewStreet Research due to valuation concerns.
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Analyst Pierre Ferragu called for limited upside for the shares after a 157% rally since the start of the year.
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“We would be buyers again, but only on extended weakness,” NewStreet Research said.
Nvidia Stocks received a rare downgrade on Wall Street on Friday.
NewStreet Research analyst Pierre Ferragu downgraded the artificial intelligence powerhouse’s shares from “Buy” to “Neutral” in a Friday note, arguing that the stock appears to be fully valued.
Ferragu hasn’t necessarily turned bearish on the stock. The analyst has a one- and two-year price target of $135 and $143 respectively, which represents a potential upside of 6% and 12% from current levels.
He’s simply less optimistic than he has been lately, and less optimistic than much of the rest of Wall Street.
“We see limited further benefit based on what we’re hearing from the value chain,” Ferragu said. “We are downgrading the stock to Neutral today as the uptrend will only materialize in a bull case, where the outlook improves significantly beyond 2025, and we are not yet confident that this scenario will play out.”
Ferragu said that while Nvidia still has the strongest AI franchise among its peers, a “more cautious view on the stock” is necessary after this year’s 157% rally.
“The quality of the franchise is nevertheless intact and we would be buyers again, but only in the event of prolonged weakness,” Ferragu said.
Gloomy views on Nvidia are rare among Wall Street analysts, with 89% of the 72 analysts covering the company rating the stock a Buy, according to Bloomberg data.
Ferragu’s price target of $135 is in line with the stock’s 12-month average price target of $134.77.
On the more bullish side, some expect Nvidia’s meteoric rise to continue, as one analyst predicts the stock will nearly double to a $6 trillion valuation by the end of the year.
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