Low valuation fails to offset management change risks! Bernstein maintains a Market Perform stance on NVIDIA Corporation (NVDA.US) with a price target of $200.

After NVIDIA Corporation (NVDA.US) announced that Jensen Huang has resigned as Chief Executive Officer and director, Wall Street investment bank Bernstein released a research note stating that although NVIDIA Corporation's current valuation is already at highly attractive levels and the management change is not expected to have a significant impact on the company's near-term business, considerable uncertainty remains regarding subsequent developments and whether the new CEO can continue the operating strategy under Jensen Huang's leadership. Therefore, the firm maintained its Market Perform rating on NVIDIA Corporation and its $200 price target. NVIDIA Corporation's board of directors announced on November 12 that Jensen Huang has resigned as President, Chief Executive Officer and director, effective immediately. Current Chief Financial Officer Colette Kress has been appointed interim Chief Executive Officer and will continue to serve as Chief Financial Officer. Meanwhile, the board will search for a permanent CEO both internally and externally. In addition, Harvey C. Jones, who has served as a director of NVIDIA Corporation since 1993, has been appointed Chairman of the Board. NVIDIA Corporation will still report its latest quarterly results on November 17 as originally scheduled, and the management change announcement was not accompanied by any earnings guidance. Bernstein analyst Stacy Rasgon said that on the positive side, Kress should be able to maintain NVIDIA Corporation's normal operations at this stage, and the firm is not particularly concerned that the events of the past week will affect the company's near-term business. At the same time, after the recent sharp pullback in the share price, NVIDIA Corporation's valuation now looks very cheap. However, Rasgon noted that the market still faces two important areas of uncertainty. On the one hand, follow-up news and related investigations surrounding the management change may continue to weigh on investor sentiment; on the other hand, it remains to be seen whether the new CEO can truly succeed Jensen Huang and continue the core role he played in NVIDIA Corporation's long-term development. Bernstein believes that Jensen Huang was not only deeply involved in setting the direction of NVIDIA Corporation's business development, but also played a crucial role in the company's relationships with customers, suppliers, employees and the broader semiconductor and artificial intelligence industry ecosystem. This means that even if NVIDIA Corporation's near-term business operations remain stable, the long-term leadership transition could still bring uncertainty to the company's strategy execution and industry partnerships. Rasgon said it was precisely these uncertainties that prompted Bernstein to move to a wait-and-see stance on the evening of November 11. Although the firm hopes to become positive on NVIDIA Corporation again in the future, at this stage it is still difficult to recommend that investors buy the stock. It is worth noting that Bernstein's cautious stance on NVIDIA Corporation does not mean the firm is bearish on the growth prospects of artificial intelligence (AI) and data center businesses. On the contrary, its latest financial forecasts still show that NVIDIA Corporation is expected to achieve strong revenue and earnings growth over the next several years. According to Bernstein's forecasts, NVIDIA Corporation's fiscal 2027 revenue will grow 88.4% year over year to $406.898 billion, fiscal 2028 revenue will grow a further 69.6% to $690.258 billion, and fiscal 2029 revenue is expected to reach $954.114 billion, approaching the $1 trillion mark. Among these, the data center business will remain the core engine driving NVIDIA Corporation's performance growth. Bernstein expects this business to grow 95.2% year over year to $378.269 billion in fiscal 2027, grow 73.9% to $657.798 billion in fiscal 2028, and reach $918.189 billion in fiscal 2029, accounting for more than 96% of the company's total revenue. On profitability, Bernstein expects NVIDIA Corporation's adjusted earnings per share to reach $9.20 in fiscal 2027 and further increase to $15.80 and $22.28 in fiscal 2028 and fiscal 2029, respectively. The firm expects NVIDIA Corporation's adjusted gross margin to remain at a high level of 72.5% in fiscal 2028, with an adjusted operating margin of 65.2%. For the upcoming fiscal 2027 third-quarter results, Bernstein expects NVIDIA Corporation's revenue to grow 90.1% year over year to $108.390 billion, of which data center business revenue will grow 97.2% year over year to $101 billion, with adjusted earnings per share expected at $2.47. In terms of valuation, based on NVIDIA Corporation's closing price of $173.73 on November 11, the stock trades at approximately 18.9 times and 11 times Bernstein's adjusted earnings per share forecasts for fiscal 2027 and fiscal 2028, respectively. However, despite NVIDIA Corporation's still-strong earnings growth prospects, Bernstein adopted relatively conservative assumptions in its valuation. Based on NVIDIA Corporation's average adjusted earnings per share of $19.04 for fiscal 2028 and fiscal 2029, the firm applied a price-to-earnings multiple of about 11 times to arrive at its $200 price target, implying about 15% potential upside from the November 11 closing price. Bernstein emphasized that NVIDIA Corporation's market opportunity in the data center sector remains enormous, but the uncertainty brought by the management transition and related investigations could persist for quite some time. Against this backdrop, even though the current stock valuation is already quite low, the firm still prefers to wait for more clarity before reassessing the investment opportunity in NVIDIA Corporation.