Nvidia (NASDAQ:) Continues to Shine
Nvidia recently reported another exceptional quarter, surpassing both sales and earnings estimates. The company’s earnings per share (EPS) stood at $0.81, reflecting a remarkable 101% growth compared to the previous year. Additionally, Nvidia reported sales of $35 billion, marking an impressive 94% increase over the same period.
Consistent Outperformance
For years, this blog has been closely monitoring Nvidia’s performance, even when the stock price was relatively low. The company has consistently outperformed expectations, beating both sales and earnings estimates. However, the last three quarters have shown a reversion to the mean.
Recent Performance Metrics
- Earnings have surpassed estimates by 8.9%, 4.6%, and 8.0% in the last three quarters, falling below the 8-quarter average of 32%.
- Sales have exceeded estimates by 5.9%, 4.5%, and 5.8% during the same period, also below the 8-quarter average of 8.5%.
Market Expectations and Price Movement
The market is currently pricing in approximately 50% EPS growth and 55% sales growth over the next four quarters for Nvidia. With a forward price-to-earnings ratio of 37x, the stock seems reasonably valued considering its expected growth rates. In comparison, the forward PE ratio for the industry average is 22.3x, based on an 11% growth rate.
Despite the significant price appreciation of +195% this year and +240% last year, Nvidia’s stock price does not appear to be overvalued given its robust growth prospects.
Future Outlook and Potential Support Levels
While the stock has experienced notable gains, it is essential to consider the market’s high expectations for Nvidia’s growth. The recent consolidation in the "beat rate" suggests a potential adjustment in the stock price. The current uptrend remains intact, with $135 serving as a crucial support level in the short term.
For investors looking to enter a position, a price point around $120 may offer an attractive entry opportunity. This level aligns with previous declines and the 200-day moving average, providing a potential confluence of support.
Analysis and Conclusion
Historically, periods of outperformance are often followed by periods of underperformance. While Nvidia may experience some consolidation in its price gains, the company’s strong position in key industries of the future makes it a compelling long-term investment.
In summary, Nvidia’s exceptional performance and growth prospects position it as a standout company in the market. Investors should monitor key support levels and market expectations to make informed decisions regarding their investment in Nvidia.