Nvidia (NVDA) delivered solid fiscal Q2 results, supported by a stronger long-term outlook, with management pointing to higher revenue expectations and continued demand, Morgan Stanley said in a note Thursday.
The firm said the quarter was above expectations, but the more important takeaway was management's longer-term outlook. Nvidia expects about 70% growth in fiscal 2028, compared with Morgan Stanley's previous estimate of 52% and consensus of around 40%.
The bank said it is raising its fiscal 2028 and fiscal 2029 revenue estimates about $100 billion and $200 billion, respectively. Demand remains heavily supply-constrained, and management said demand is "much greater" than the 70% growth level, it added.
Gross margins were slightly weaker because of higher memory costs, but this removes an important overhang for investors, the firm said, adding that Nvidia's expected 72% to 73% gross margin next year is broadly in line with its 72.5% estimate.
"This is our Top Pick in the semis group, with a compelling product cycle, exceptional growth, and valuation below peers," the bank added.
Morgan Stanley raised its price target on Nvidia from $288 to $300 and reiterated its overweight rating.
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