NVIDIA Corporation (NVDA) is poised to establish sustained dominance and drive tremendous growth through pioneering semiconductor advancements and strategic partnerships. However, does this position NVDA as the standout stock for unprecedented growth and earnings this year? Let’s find out….
NVIDIA Corporation (NVDA) exemplifies the height of market fervor for artificial intelligence. Renowned for its semiconductor innovations, NVDA chips represent the cornerstone of the artificial intelligence landscape. Through strategic partnerships and collaborations, the company is strengthening its market leadership by constantly pushing the boundaries of technological progress.
On March 7, NVDA’s partnership with HP Inc. (HPQ) to integrate NVIDIA CUDA-X™ data processing libraries with HPQ AI workstation solutions represents a significant advancement for the company. The collaboration is expected to enhance NVDA’s position in the AI development landscape by providing accelerated data preparation and processing capabilities, strengthening its offerings, and attracting developers looking for efficient solutions.
Additionally, the unveiling of StarCoder2 on February 28, in collaboration with ServiceNow, Inc. (NOW) and Hugging Face, highlights NVDA’s commitment to innovation.
These unique alliances and game-changing advancements further validate NVDA’s competitive advantage on the technology front and open up new areas of business expansion in the future. As the company is enabling faster development of AI models for wide-ranging applications, this further extends its competitive advantage in the rapidly growing global AI market that expects sustained growth and further innovation.
NVDA shares have gained 18.8% and 92.9% over the past six months, closing the latest trading session at $879.44.
Here are the financial aspects of NVDA that could influence its price performance in the near term:
Mixed financials
In its fiscal fourth quarter, ended January 28, 2024, NVDA’s non-GAAP revenues increased 265.3% year-over-year to $22.10 billion. Its non-GAAP net income and non-GAAP EPS were $12.84 billion and $5.16 per share, up 490.6% and 486.4%, respectively, from the same period last year. last year.
However, as of January 28, 2024, NVDA’s total current liabilities were $10.63 billion, up from $6.56 billion as of January 29, 2023.
Robust historical growth
Over the past three years, NVDA’s revenue and EBITDA have grown at a CAGR of 54% and 81%, respectively. Its net profit and EPS grew at respective CAGRs of 90.1% and 90.3% during the period. Additionally, the company’s leveraged free cash flow has increased at a CAGR of 74.6% over the same time frame.
Optimistic analysts’ estimates
The consensus revenue estimate of $110.57 billion for the fiscal year ending January 2025 reflects an 81.5% year-over-year increase. Likewise, the company’s EPS for the current year is expected to grow 90.3% from the previous year to $24.66. Additionally, the company has surpassed consensus estimates for revenue and EPS in all four trailing quarters.
Solid profitability
The stock’s trailing 12-month gross profit margin and trailing 12-month EBITDA margin of 72.72% and 56.60% are 49.1% and 515.3% higher than industry averages of 48, 76% and 9.20%, respectively. Additionally, the company’s trailing 12-month leveraged FCF margin of 32.61% is 261.5% higher than the industry average of 9.02%.
Elongated evaluation
In terms of forward non-GAAP P/E, NVDA trades at 36.85x, 48.2% higher than the industry average of 24.87x. Its forward EV/Sales and forward EV/EBITDA of 20.10x and 31.67x are 588% and 110.7% higher than their respective industry averages of 2.92x and 15.03x. Additionally, the stock’s forward price/sales of 20.23x compares to the industry average of 2.93x.
POWR ratings show mixed outlooks
NVDA’s outlook is reflected in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. POWR Ratings are calculated by taking into account 118 different factors, each optimally weighted.
Our proprietary rating system also evaluates each security based on eight distinct categories. NVDA has impressive growth prospects, consistently earning an A grade due to its strong historical performance. However, its Value rating receives a less favorable D grade, mainly due to its high valuation.
In terms of stability, NVDA faces hurdles, evident in its F grade. This is emphasized by the stock’s 24-month beta of 1.95, indicating higher volatility.
NVDA is ranked 22nd out of 90 in the Semiconductor and Wireless Chip industry. Click here to access NVDA’s Momentum, Sentiment and Quality ratings.
Bottom line
NVDA has the potential to establish itself as a leader in the field of artificial intelligence and promote long-term dominance and growth through revolutionary advances in the field of semiconductors. Strategic alliances that expand the company’s AI products are strengthening NVDA’s technological supremacy and market leadership.
However, it may be wise to wait for a more favorable entry time considering the stock’s current valuation and stability.
How does NVIDIA Corporation (NVDA) compare to its peers?
While NVDA has an overall grade of C, equivalent to a Neutral rating, you can take a look at these stocks rated A (Strong Buy) and B (Buy) in the Semiconductor & Wireless Chips industry: Cirrus Logic, Inc. ( CRUS), ChipMOS TECHNOLOGIES INC. (IMOS) and Everspin Technologies, Inc. (MRAM). To explore more semiconductor and wireless chip stocks, click here.
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NVDA shares rose $6.30 (+0.72%) in premarket trading Friday. Year to date, NVDA has gained 77.59%, compared to an 8.34% gain in the benchmark S&P 500 index over the same period.
About the author: Aanchal Sugandh
Aanchal’s passion for financial markets drives his work as an investment analyst and journalist. He earned his bachelor’s degree in finance and is pursuing the CFA program. He is adept at evaluating the long-term prospects of stocks with his fundamental analysis skills. His goal is to help investors build portfolios with sustainable returns.
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The mail Nvidia (NVDA): Growth projections and investment potential for 2024 appeared first StockNews.com