1 Wall Street Firm Thinks Nvidia Stock Is Going to $144. Is It a Buy?

The market indexes pulled back last month, which also pulled Nvidia (NVDA -1.78%) off its highs. Nvidia is one of the best-performing stocks in the S&P 500 this year, with the shares currently up 116% year to date. But the further the stock climbs, the greater the expectations for the company's upcoming fiscal second-quarter earnings report on Aug. 28.

Wall Street is very bullish on Nvidia stock, and Morgan Stanley is the latest firm to weigh in. On Wednesday, Morgan Stanley analysts maintained an overweight (buy) rating on the shares with a $144 price target, which would be a new all-time high and up 34% from the current price.

Nvidia is enjoying tremendous momentum in its data center business, but considering the volatility that can happen during earnings season, should investors buy before the company's upcoming earnings report?

Nvidia reported stellar numbers over the last year. In the fiscal first quarter ending in April, demand for the company's popular H100 graphics processing units (GPUs) drove its data center revenue up an astonishing 427% year over year.

The lucrative margins of these advanced chips led to a massive 629% year-over-year increase in Nvidia's earnings per share. These incredible numbers could support new highs for the stock in the near term. The forward price-to-earnings (P/E) ratio of 38 gives Nvidia a reasonable PEG ratio of 1.15 using the Wall Street consensus long-term earnings growth estimate of 33%. The rule of thumb is that growth stocks are undervalued if the P/E is less than the company's earnings growth rate.

But it might be smart to wait until after earnings to buy shares. The chip industry can experience slowdowns in growth that come unexpectedly. Moreover, Nvidia faces increasing competition from cloud service providers and other semiconductor companies that are making custom chips for artificial intelligence.

If Nvidia continues to report strong growth, it will provide more evidence of Nvidia's opportunity despite these risks, and given the stock's valuation, there would still be time to buy the stock ahead of more gains.