Needham analyst Rajvindra Gill maintained a Buy rating and a price target of $ 400.
Credit Suisse analyst John Pitzer reiterated a pass rating and a price target of $ 425.
The analyst sees limited financial implications in the short term. However, Nvidia’s first full-stack autonomous victory could signal the start of a multi-year business transformation that could unlock a total addressable market of $ 700 billion in AI hardware, software and recurring services for autonomous vehicles, he said.
“Today, cars account for less than 5% of sales, so there is a long and largely incremental track of growth that can complement NVDA’s leadership in the gaming / data center.”
The software-defined computing architecture for automated driving will be built on Nvidia’s DRIVE platform using its upcoming Orin SoC, the analyst said.
“Together with Datacenter and Gaming, we see Automotive as a significant long-term growth opportunity for NVDA, which we believe is the leader in the automotive SoC space.”
The Mercedes deal represents a traditional TAM potential of more than $ 1 billion to $ 2 billion in revenue per year; 80 cents at $ 1.60 EPS; silicon / hardware content of $ 500 to $ 1,000 per vehicle; 55% incremental operating margins; and 10% of total revenue, said the analyst.
Credit Suisse sees an added bonus derived from software updates and AV “skills” like parking, valet, and racing.
The software plug-ins alone could generate more than $ 2 billion per year of highly visible, highly profitable and highly valued revenue from Mercedes alone, Pitzer said.
“We continue to see NVDA as the best secular growth stock in Semis with an almost open TAM protected by the advantage of early motors and wide / deep pits in silicon AND software.”
Latest ratings for NVDA
|Jun 2020||Jefferies||Maintains||To buy|
|Jun 2020||Morgan Stanley||Degradations||Over weight||Equal weight|
|May 2020||Morgan Stanley||Maintains||Over weight|