BofA is calling for a 32% jump for NVDA in the next year
GPU expert Nvidia Corporation (NASDAQ:NVDA) has pulled back 10.7% since its March 13 record high of $254.50 due to news the company is halting its self-driving car program, as well as a broader drop in tech shares. BofA-Merrill Lynch is viewing this all as a buying opportunity, however. The brokerage firm this morning replaced Facebook (FB) on its U.S top ideas list with NVDA, reiterating its "buy" rating and an eye-popping $300 price target.
According to the covering analyst, the chipmaker is set for a big second half of the year thanks to continued growth in data centers and gaming, disagreeing with skeptics such as Wells Fargo who see a slowdown ahead. In the data center business in particular, BofA believes Nvidia has a "well-established moat" and that investors should look past the recent automated driving setback.
Analysts have long had differing opinions on the semiconductor stock. By the numbers, there are 24 brokerage firms in coverage, with 13 saying "buy" and the 11 others handing out "hold" or "strong sell" ratings. Another firm on the bullish side is RBC, which hiked its price target less than a month ago and also called for more growth in data centers and gaming.
Shifting gears, a look at recent options activity shows what appears to be a synthetic long initiated back on March 26 when NVDA stock was trading just below $239. Specifically, the trader seemingly bought to open 10,000 April 250 calls and sold to open an equal amount of April 250 puts, boldly predicting a strong move higher from the shares. These strikes are now home to the two largest accumulations of open interest for the security.
For what it's worth, data suggests it's a better time to target calls over puts. This is based on a 30-day implied volatility skew of 15.1%, which is hovering right near a 52-week high. In other words, put options are pricing in higher volatility expectations at the moment compared to their call counterparts. Nvidia shares were last seen trading up 2.9% at $227.39.