I am neutral on Nvidia (NASDAQ:), as its strong growth rate and bullish Wall Street consensus are offset by its fairly rich valuation.

Nvidia (NASDAQ:) is an American multinational technology company. It is responsible for the creation of graphics processing units that are used in gaming.

Nvidia is an innovator in the design of systems on chips for accelerated computing and self-driving vehicles. It is also a major player in driving growth in manufacturing and healthcare.

Strength

Nvidia’s Q2 2021 earnings report announced that NVIDIA RTX is featured in over 130 games and applications, including Minecraft RTX and Adobe (NASDAQ:) products.

Twenty games include some of the most popular e-sports titles, and support NVIDIA Reflex’s game-lag-reducing NVIDIA Reflex ecosystem. NVIDIA Fleet Command and NVIDIA Base Command were also launched by the company. These services simplify edge AI management through a cloud-based service that is transformational for many industries.

NVIDIA Omniverse is also a 3D virtual simulation platform and virtual collaboration tool.

Recent Results

For the second quarter of 2021, Nvidia reported revenue of $6.5 billion, showing gains of 68% from last year, and an increase of 15% from the first quarter.

Nvidia’s gaming revenue was $3.1billion, an increase of 85% compared to the year before. The extremely strong gaming demand outstripped the supply and GeForce GTX 3080 Ti graphics cards were the main drivers.

In the Professional Visualization segment, second quarter revenue was $519million. That’s an increase in 40% over the first quarter and 156% more than the year before.

Record Data Center revenues of $2.4 billion were announced by the company, which was 35% higher than a year ago. In the Automotive sector, revenue increased by 37% to $152 million.

Nvidia is optimistic about the next quarter. It expects that its revenue will rise to $6.8billion and GAAP and nonGAAP gross margins, respectively, to reach 65.2% and 67%, respectively.

Valuation Metrics

Nvidia stock does not look particularly cheap or expensive here, as it is priced at a fairly high forward P/E ratio of 53.2x, but is also growing at a very strong clip.

In 2022, normalized earnings per shares are projected to rise by 61.6%, and 11.8% 2023.

Wall Street’s Take

From Wall Street analysts, Nvidia earns a Strong Buy analyst consensus, based on 23 Buy ratings, one Hold rating, and one Sell rating in the past three months. The average NVDA target price of $237.27 places the upside potential at 7.5%.

Summary and Conclusions

Nvidia is enjoying rapid growth, and has very strong support from Wall Street analysts. Although the stock may not be very cheap, it is unlikely to be extremely undervalued.

Disclosure: Samuel Smith had no position at the time this article was published.

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