Nvidia’s Earnings Report: A Hidden Bargain?

by Warren Seah

Analyst Ben Reitzes from Melius Research has challenged the notion that shares of chip giant Nvidia Corp. are “far too expensive.” In fact, he suggests that the stock may actually be considered “cheap” in comparison to other AI-related stocks.

Currently, Nvidia shares (NVDA) are trading at 28 times the consensus expectations for calendar year 2024 earnings per share, according to Reitzes. This is slightly higher than the average of 23 times for the AI stock basket he covers, excluding Snowflake Inc.

However, despite this seemingly higher valuation, Reitzes points out that Nvidia’s price-to-earnings multiple is still lower than that of tech heavyweights like Amazon.com Inc. (AMZN), Adobe Inc. (ADBE), and Microsoft Corp. (MSFT). He also mentions that Nvidia’s estimates may be on the conservative side, which adds further value to the stock.

Furthermore, when taking growth-adjusted metrics into consideration, Nvidia’s stock emerges as an even better deal compared to Alphabet Inc. (GOOG, GOOGL), Microsoft, and Apple Inc. (AAPL). Metrics such as enterprise value to earnings before interest, taxes, depreciation, and amortization, as well as enterprise value to sales, support this conclusion.

In light of these findings, it appears that Nvidia’s recent success and record stock prices may not be as unwarranted as some critics suggest. It is worth considering whether this chip giant should be seen as an attractive investment opportunity, presenting potential value for investors in the long run.

Read: Can Nvidia keep growing this quickly? Here’s what Wall Street thinks.

Nvidia’s Potential for Growth Mirrors Apple’s Success, says Analyst

As Nvidia continues to make strides in the technology industry, some experts believe that the company’s attributes are positioning it for long-term success. Much like Apple, which shifted from being solely a hardware company after a period of rapid growth, Nvidia may also evolve into something greater.

“We would also point out that Nvidia is laying the groundwork with attributes that could warrant a high-20s multiple long-term, much like Apple did after its rapid growth phase to be considered much more than a hardware company,” stated an analyst.

Despite the lack of significant stock gains following their recent earnings report, Nvidia’s stock could pick up momentum as the market digests the information. The analyst suggests that Nvidia’s valuation alone may provide support in this regard.

Continue reading: Why Nvidia’s AI bonanza may have only just begun

The same analyst remains optimistic about Nvidia’s future and rates it as a “buy” with a target price of $730. Several factors contribute to this positive outlook, including the potential for increased gross margins and the development of the company’s L40S graphics processing unit.

“This product should appeal to AI server makers and their customers who are driving next-generation applications,” the analyst explained. “We anticipate brisk sales of this product.”

Don’t miss out: Nvidia to $1,100? This analyst thinks the stock can more than double.

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