Bernstein: NVIDIA's current valuation has high return potential

On December 20, Bernstein said that the valuation of NVIDIA (NVDA. O) relative to the Philadelphia Stock Exchange Semiconductor Index has become rarely attractive, and the overall valuation multiple bodes well for future returns. Analyst Stacy Rasgon wrote that relative to the chip stock index, NVIDIA "is currently at a discount of about 13% and is in the 100th percentile of its history. In fact, there have only been 13 trading days in the past decade when NVIDIA's stock price has been valued at a lower valuation relative to SOX than it is today." Nvidia's recent valuation is about 25 times future EPS, "for the company, a forward price-to-earnings ratio of 25 times means its stock price is at the 11th percentile of the valuation distribution over the past decade", a level that is "already fairly cheap in absolute terms", and "investors who bought Nvidia at a valuation below 25 times have been well rewarded over the past decade - holding it for one year has returned an average of more than 150% and never had a negative return during that time." Bernstein has an "outperform" rating on Nvidia, with a price target of $275.