NVIDIA Corporation (NVDA) Attracting Investor Attention: Key Insights

Nvidia (NVDA) has recently emerged as a stock of significant interest among investors. It's essential to delve into factors that could influence its future performance.

Over the past month, shares of Nvidia, a company known for its graphics chips used in gaming and artificial intelligence, have surged by +19%, significantly outperforming the Zacks S&P 500 composite, which increased by only +4.5% during the same period. The overall Zacks Semiconductor - General industry, which Nvidia is part of, rose by 19.8% as well. As such, a pressing question arises: What are the future prospects for Nvidia's stock?

Typically, media rumors or news regarding substantial changes in a company's business environment can lead to rapid stock movements. However, fundamental factors are what generally shape longer-term buy-and-hold investment decisions.

Revisions to Earnings Estimates

At the core of our analysis is changes in a company's earnings projections. The reasoning is straightforward: the fair value of a stock is primarily based on future earnings potential.

We evaluate trends based on the revisions made by analysts covering the stock. When analysts increase their earnings estimates, the fair value of the stock rises correspondingly. A higher fair value compared to the current market price often encourages investors to buy, resulting in upward price movement. Research supports that trends in earnings estimate adjustments have a strong correlation with stock price changes in the short term.

For the current quarter, Nvidia is projected to earn $0.74 per share, marking an impressive jump of +85% from the same quarter last year. Importantly, the consensus estimate has remained stable over the past month.

For the current fiscal year, analysts forecast earnings of $2.82 per share, representing a substantial increase of +116.9% from the previous year. This estimate has also remained unchanged over the last month.

Looking ahead to the next fiscal year, the consensus estimate is $3.77 per share, indicating a growth of +33.9% compared to the prior year. This estimate has seen a slight increase of +1% over the past month.

Nvidia holds a solid track record as indicated by our proprietary stock rating tool, which suggests that it may experience positive price movements in the near term due to its strong earnings estimate revisions. Presently, Nvidia is rated Zacks Rank #2 (Buy).

Projected Revenue Growth

While earnings growth is a key indicator of financial health, revenue growth is equally important for sustaining that earnings growth. Without consistent revenue increases, long-term earnings growth becomes challenging.

For Nvidia, analysts estimate revenues of $32.74 billion for the current quarter, translating to a significant year-over-year increase of +80.7%. For the current fiscal year, the revenue estimates stand at $124.66 billion and $174.35 billion for the following year, indicating impressive growth rates of +104.6% and +39.9%, respectively.

Last Reported Results and Surprise History

In its most recent quarterly report, Nvidia announced revenue of $30.04 billion, reflecting a +122.4% year-over-year growth. The earnings per share (EPS) for that quarter was $0.68, a substantial rise from $0.27 reported a year earlier.

Nvidia exceeded the Zacks Consensus Estimate of $28.42 billion in revenues, resulting in a surprise of +5.72%, while the EPS surprise was recorded at +6.25%.

The company has consistently outperformed consensus EPS estimates over the past four quarters and has exceeded revenue expectations in each instance during this timeframe.

Valuation

Before making any investment decision, it's crucial to assess the stock's valuation. Understanding whether Nvidia's price accurately reflects its intrinsic value and growth prospects is vital for predicting its future performance.

Comparing Nvidia's valuation multiples, including price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF), with historical values helps determine its valuation status—fairly valued, overvalued, or undervalued. Moreover, contrasting these metrics with its industry peers provides further insight.

The Zacks Value Style Score evaluates various valuation metrics and places Nvidia in the F category, suggesting it is trading at a premium compared to its industry peers.

Bottom Line

The insights gathered from this analysis, along with further details, indicate whether Nvidia merits attention in the current market landscape. The Zacks Rank #2 suggests that the stock could outperform the broader market in the short term.

Nvidia, Stocks, Earnings