What does the earnings data actually tell you about Nvidia’s future?
Nvidia’s (NVDA) reported fourth quarter results beat estimates. Adjusted earnings per share were $5.16 versus an expectation of $4.60, that's impressive, but was this already priced in the recent rally we saw leading up to the release? Partially yes, but the number that is impressive to me is the revenue. Revenue came in at $22.10 billion versus estimates of $20.41 billion. That’s almost 2 billion dollars higher, BILLION, that’s really, really impressive. Data center revenue was anticipated to come in around $17.21 billion and beat estimates coming in at $18.4 billion. After the release, Jensen Huang, founder and CEO of Nvidia, was quoted as saying, “Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations.” This quarter report showed the dominance and recent growth in the company but can it be sustained? Mr. Huang’s quote is spot on, the world is moving towards and will begin leaning on AI more, but just because Nvidia is the current leader of the pack doesn’t necessarily mean it will stay there. Although this report was necessary to justify the current value of the stock, the growth will be needed to support this level.
Source: Yahoo Finance
What needs to happen for Nvidia to continue its recent rise?
AI (artificial intelligence) stocks are the latest craze to hit the market but is this movement here to stay? Yes, yes it is. Whether in the tech space or pharmaceutical, companies are shifting their efforts (and money) towards AI. AI is important for the overall markets, so what needs to continue within Nvidia for the company as an individual to continue this success? Well, Nvidia’s orders and revenue are heavily reliant on chip sales with Microsoft (MSFT) and Meta (META). This is a good thing for now. Two powerhouses in the markets using Nvidia as their primary chip provider, BUT what happens as the AI market begins to get more competitive. Loyalty only lasts if all parties involved can continue to stay profitable. As Jensen Huang said, AI has hit a tipping point, this is going to cause other companies to shift their focus and will create a competitive market. For now, a few competitors to watch are Intel (INTC) and Advanced Micro Devices, Inc. (AMD), but Nvidia is years ahead at this point.
Nvidia’s main areas of expertise are gaming and creating, laptops and workstations, cloud and data centers, networks, GPUs and embedded systems. Many investors have been leery of Nvidia’s revenues since it relies heavily on two companies for its financial intake, but are Microsoft and Meta really going anywhere…no.
Source: Nvidia.com
Other positive news recently was the disclosure of Nvidia’s stake in ARM Holdings (ARM), SoundHound AI (SOUN), Recursion Pharmaceuticals (RXRX) and Nano-X Imaging (NNOX). At the time of this news release Nvidia’s stock rose on the day. Like many companies, Nvidia is trying to continue its success and keep its competitors at bay by purchasing them(or stakes in them). Let’s not forget, Nvidia tried to purchase ARM in 2020 for $40 billion but was unsuccessful in doing so - mainly due to regulatory red tape.
Source: fortune.com
So what needs to occur before the next earnings release for this stock to head towards many analysts' new targets of $1,000+ a share...continue to do what it's doing. Seems easy enough. Nvidia has been on this trajectory for sometime, the world is just catching up. As Jensen Huang stated in the recent release, “Our data processing, training, and inference from large cloud-service providers and GPU-specialized ones as well as from enterprise software and consumer internet companies. Even demand in auto, financial services, and healthcare industries are now at the multibillion-dollar level.” So Nvidia is well diversified in the space, they are not reliant on one area which is the key factor for their continued success.
Source: Yahoo Finance
Should you buy(or buy more) Nvidia for your portfolio?
Yes, yes you should buy Nvidia stock and buy more at these prices if you already have jumped on this rocket. Nvidia’s current market cap is 1.97 trillion. The forward P/E is at 33.22. The stock has grown 235% the past year with a 52 week low of 222.97 and high of 823.94. Although the price is trading close to the 52 week high, this stock has room to run. I also like it in my portfolio due to the dividends paid out.
Source: Yahoo Finance
Let’s look at some more numbers...if you had invested $1,000 in Nvidia in 1999, when the stock went public, your investment would now be worth $2,784,065 as of February 20, 2024. And $1,000 ten years ago would have you up 22,340%, with a cash value of $148,226. If you think you're late to the party, look at this here, $1,000 invested in Nvidia a year ago would have tripled your investment, to an estimated cash value around $3,248. Not a bad return right?
Source: CNBC
Disclaimer: Past performance is not indicative of future returns. Opinions are my own. Profitable trades are not guaranteed.
On the date of publication, Peter Mooses had a position in: NVDA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.