This Monster Metaverse Stock With Analysts Predicted 48% Rise Is A Screaming Buy

Nvidia (NVDA 1.72% ) investors have had an unforgettable year so far. Shares of the tech giant have fallen significantly in 2022 for several reasons. From the Federal Reserve’s hawkish stance to Nvidia’s abandoned Arm acquisition and the market rejecting Nvidia’s latest quarterly results, a lot has happened that has shaken investor confidence. However, some Wall Street analysts think Nvidia could offer an impressive advantage.

Nvidia stock has a price target of $400 at the high end, which would translate to a 70% upside from its Feb. 22 close. The average analyst estimate is $346, which would represent a jump of 48%. With catalysts like the Metaverse coming into play, it wouldn’t be surprising to see this tech stock fly higher in the future.

Nvidia gets a boost from the Metaverse

Nvidia posted strong results for the fourth quarter of fiscal 2022 on Feb. 16, with revenue up 53% year-over-year to $7.6 billion and adjusted earnings up by 69% at $1.32 per share. The data center business played a significant role in this impressive growth and accounted for 43% of the company’s revenue.

Nvidia’s data center revenue grew 71% year over year, and one of the reasons for its tremendous growth was Metaplatforms (FB 1.39% ). Meta Platforms last month announced the development of the AI ​​Research SuperCluster (RSC), which it says will become the world’s fastest AI (artificial intelligence) supercomputer when fully built by the mid of this year. Meta Platforms uses Nvidia’s GPUs (graphics processing units) to power its supercomputer.

Image source: Getty Images

Meta Platforms believes that “the work done with RSC will pave the way for creating technologies for the next major computing platform – the metaverse, where AI-based applications and products will play an important role.” The metaverse allows people to interact in a virtual world.

The supercomputer is currently powered by 6,000 Nvidia A100 data center GPUs. Nvidia says the RSC will eventually be powered by 16,000 A100 GPUs to deliver a bigger boost in AI performance.

Being Meta Platforms’ partner in the metaverse could pay off for Nvidia since Meta Platforms spent $10 billion last year building the metaverse, a figure that is expected to rise in the coming years.

And that’s not the only way Nvidia is building the metaverse and preparing to benefit from it. Nvidia’s Omniverse platform is gaining traction as it enables engineers, designers and developers to create “physically accurate digital twins of buildings and products, or create massive, true-to-life simulation environments for training robots or autonomous vehicles”.

Nvidia said in November that this platform was used by more than 700 companies. Its adoption is expected to increase further, as the metaverse will create the need for more simulated digital worlds. A third-party report predicts that the digital twin market could grow at an annual rate of 58% through 2026 and reach a value of $48 billion.

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It’s time to buy

Nvidia stock isn’t cheap despite falling in 2022. The stock is trading at 60 times earnings and 22 times sales. For comparison, the S&P500 has a price-to-earnings ratio of 24 and a price-to-sell multiple of 2.85.

But Nvidia’s rich valuation seems warranted given the exceptional growth it has recorded quarter after quarter. Additionally, Nvidia stock is available at a steep discount from last year, when it traded at 30.6 times sales and 90.6 times earnings.

The company’s rapid growth appears to be here to stay, as its forecast calls for 43% year-over-year revenue growth in the current quarter to $8.1 billion. Even better, analysts expect Nvidia’s impressive momentum to continue for at least the next five years, with annual earnings growth of 34.7% expected over that period. The growing metaverse opportunity could help Nvidia post even faster earnings growth in the long run.

That’s why the time seems right for growth investors looking to add a metaverse stock to their portfolios to consider Nvidia.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end advice service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.

About Mariel Baker

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