CITRON RESEARCH: Nvidia has 'become a casino stock' NVDAGet the Full StoryThomson ReutersCitron Research fired out a tweet calling GPU manufacturer Nvidia a "casino stock." The firm released a scathing white paper on Friday, saying the stock would collapse to 130 a share before trading at 180.
The research firm has been right before. It predicted a return to 90 a share when Nvidia was trading at 119. The stock fell to 95.
Nvidia's shares are moving so fast, they are trending on Google. The GPU manufacturer is up around 5 on Friday and 16.24 this week despite the company not announcing any major news. Comparatively, the S&P 500 is only up 0.38 this week.
Growth in the company can be explained partially by an increased demand for powerful graphics processing units worldwide. Virtual reality, driverless cars, machine learning and artificial intelligence all run well on GPUs.
Citron points out that Nvidia's core business, gaming, is where the focus should be. The company is expected to make 6.1 billion in revenue in 2018, compared to 1.9 in revenue expected from other bets.
"While we are fans of NVDA emerging business in auto, gaming, and AI have the prospects of these technology doubled in value in 6 months or is this an example of analysts chasing stock price?," Citron's white paper asks.
Meanwhile, Wall Street's biggest Nvidia bull is Citi Research, who says Nvidia chips could be used in large-scale data centers and that more of those centers are being built to keep up with demand in artificial intelligence and virtual reality. The firm increased its target price for the stock to 180, representing an 8.5 upside to the current share price. When Citi announced their increased target price, it was a 21 upside.
The stock took off Citi's call, but Citron says the move is not sustainable. The white paper points out that the number of call options on Nvidia is exploding in popularity. Because traders aren't actually buying the shares it's like "the market is pricing lottery tickets -- 160 calls -- not an investment in future prospects on NVDA in common stock," Citron said its report.
Only time will tell who is right.
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