NVIDIA Corporation (NVDA) is poised to establish sustainable dominance and drive extraordinary growth through pioneering semiconductor advancements and strategic partnerships. However, does this position NVDA as the standout stock for unprecedented growth and gains this year? Let's find out….
NVIDIA Corporation (NVDA) illustrates the peak of market enthusiasm for artificial intelligence. Known for its semiconductor innovations, NVDA's chips are serving as a cornerstone of the AI landscape. Through strategic partnerships and collaborations, the company is strengthening its leadership in the market, constantly pushing the boundaries of technological advancement.
On March 7, NVDA's partnership with HP Inc.HPQ) to integrate NVIDIA CUDA-X™ data processing libraries with HPQ AI workstation solutions marks a significant advance for the company. The collaboration is expected to improve NVDA's position in the AI development landscape by providing accelerated data preparation and processing capabilities, strengthening its offerings and attracting developers seeking efficient solutions.
For more, discovery of StarCoder2 on February 28, in association with ServiceNow, Inc.now) and Hugging Face, highlights NVDA's commitment to innovation.
These unique alliances and innovative advancements further prove NVDA's competitive edge on the technology front and open up new areas of future business expansion. As the company is enabling faster AI model development for broad applications, this further expands its competitive edge in the fast-cresting global AI market that predicts sustained growth and further innovation.
Shares of NVDA have gained 18.8% and 92.9% over the past month and six months, closing the last trading session at $879.44.
Here are the financial aspects of NVDA that could affect its price performance in the near term:
Mixed finance
In the fiscal fourth quarter, which ended Jan. 28, 2024, NVDA's non-GAAP revenue rose 265.3% year-over-year to $22.10 billion. Its non-GAAP net income and non-GAAP EPS came in at $12.84 billion and $5.16 per share, up 490.6% and 486.4%, respectively, from the year-ago period.
However, as of January 28, 2024, the total NVDA current liabilities reached $10.63 billion, up from $6.56 billion on January 29, 2023.
Strong historical growth
Over the past three years, NVDA's revenue and EBITDA grew at a CAGR of 54% and 81%, respectively. Its net income and EPS grew at respective CAGRs of 90.1% and 90.3% during the period. Additionally, the company's free cash flow grew at a CAGR of 74.6% in the same time frame.
Optimistic estimates of analysts
The consensus revenue estimate of $110.57 billion for the fiscal year ending in January 2025 reflects an 81.5% year-over-year increase. Similarly, the company's EPS for the current year is expected to grow 90.3% from last year to $24.66. Additionally, the company topped consensus revenue and EPS estimates in all four trailing quarters.
Sound 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 the industry average of 48.76% and 9.20%, respectively. Additionally, the company's trailing 12-month FCF margin of 32.61% is 261.5% higher than the industry average of 9.02%.
Extended assessment
In terms of non-GAAP forward P/E, NVDA is trading at 36.85x, 48.2% higher than the industry average of 24.87x. Forward EV/Sales and EV/EBITDA of 20.10x and 31.67x are 588% and 110.7% higher than the respective industry averages of 2.92x and 15.03x. Also, the stock's forward price/sales of 20.23x compares to the industry average of 2.93x.
POWR ratings show mixed outlook
NVDA's point of view is reflected in it POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. POWR ratings are calculated by considering 118 different factors, with each factor weighted on an optimal scale.
Our proprietary rating system also rates each stock based on eight different categories. NVDA exhibits impressive growth prospects, consistently earning an A grade due to its strong historical performance. However, its value rating receives a less favorable grade of D, mainly due to the high rating.
In terms of Stability, NVDA faces obstacles, evident in its F scale. This is highlighted by the stock's 24-month beta of 1.95, indicating higher volatility.
NVDA is ranked 22 out of 90 within Semiconductor chip and wireless industry. Click here to access NVDA's Momentum, Sentiment and Quality ratings.
end
NVDA has the potential to establish itself as a leader in artificial intelligence and drive long-term dominance and growth through innovative semiconductor advancements. Strategic alliances that complement the company's AI products are strengthening NVDA's technological supremacy and market leadership.
However, it may be wise to hold off until a more favorable entry time considering the stock's current valuation and stability.
How is NVIDIA Corporation ( NVDA ) performing against its peers?
While NVDA has an overall grade of C, equal to a neutral rating, you can view these A (Strong Buy) and B (Buy) rated stocks within Semiconductor chip and wireless industry: Cirrus Logic, Inc.CROSS), ChipMOS TECHNOLOGIES INC. (WAY) and Everspin Technologies, Inc. (MRAM). To explore more semiconductor and wireless chip stocks, Click here.
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Shares of NVDA were up $6.30 (+0.72%) in premarket trading on Friday. Year-to-date, NVDA has gained 77.59%, versus a gain of 8.34% in the benchmark S&P 500 over the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She received her bachelor's degree in finance and is pursuing the CFA program. She is adept at assessing the long-term prospects of stocks with her fundamental analysis skills. Its purpose is to help investors build portfolios with sustainable returns.
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