Bernstein: Nvidia's current valuation has high return potential

On December 20, it was reported that Bernstein stated Nvidia (NVDA.O) is currently attractively valued relative to the Philadelphia Stock Exchange Semiconductor Index, with the overall valuation multiple indicating promising future returns. Analyst Stacy Rasgon wrote that compared to the chip stock index, Nvidia is “currently trading at about a 13% valuation discount, which is at the first percentile in history. In fact, in the past decade, there have only been 13 trading days when Nvidia’s valuation relative to SOX was lower than it is now.” Nvidia’s recent valuation is about 25 times its forward EPS, “for the company, a 25x forward P/E means its stock price is at the 11th percentile of its valuation distribution over the past ten years,” a level that “is already quite cheap in absolute terms.” Moreover, “in the past ten years, investors who bought Nvidia when its valuation was below 25x have all received substantial returns—the average one-year holding return exceeded 150%, and there has never been a negative return during this period.” Bernstein gives Nvidia an “Outperform” rating with a target price of $275.