Bernstein: Nvidia's Current Valuation Has High Return Potential

December 20 News, Bernstein stated that Nvidia (NVDA.O) is rarely attractively valued relative to the Philadelphia Semiconductor Index, with the overall valuation multiple indicating a favorable outlook for future returns.

Analyst Stacy Rasgon wrote that compared to the chip stock index, Nvidia is "currently undervalued by about 13%, placing it in the top 1 percentile historically. In fact, over the past ten years, there have only been 13 trading days when Nvidia's stock price was valued lower relative to the SOX index than it is now."

Nvidia's recent valuation is approximately 25 times its future EPS, "for the company, a 25x forward P/E means its stock price is in the 11th percentile of valuation distribution over the past decade," this level "is quite cheap in absolute terms," and "over the past ten years, investors who bought when Nvidia's valuation was below 25x have achieved substantial returns—an average return of over 150% over one year, and never experienced negative returns during this period."

Bernstein maintains a "Outperform" rating on Nvidia with a target price of $275.