Nvidia stock price has pulled back in the past two weeks, moving from the year-to-date high of $212 to $180. This retreat will either accelerate or reverse once the company publishes its financial results later today.
Nvidia will likely publish strong results
Wall Street analysts are highly optimistic about the upcoming Nvidia earnings. Data compiled by Yahoo Finance shows that the average estimate among analysts is that the company’s revenue rose by 56% in the third quarter to over $55 billion.
There are signs that the sales will be much higher than these estimates as key metrics point to more demand, with some of this demand being circular in nature.
The first sign is that TSMC, the company’s biggest supplier, published strong financial results in September and boosted its forward guidance. Just recently, Jensen Huang, Nvidia’s CEO, pressed the company to accelerate the pace of manufacturing.
The other notable sign is that hyperscalers like Microsoft, Google, Meta Platforms, and Amazon have all maintained their upbeat spending plans this year. They all expect that the AI build up in the United States with continue over time.
Other smaller buyers of Nvidia chips are also accelerating, with companies like CoreWeave, IREN, Bitfarms, and Hive Digital have all committed to boosting their investments in the AI space. More demand could come from Anthropic, a company it invested in this week.
Therefore, there is a likelihood that the company’s revenue will beat estimates as it has done in the past.
Analysts are optimistic that the company’s earnings-per-share (EPS) jumped to $1.25 from the 81 cents it made a year ago. The company has a long track record of publishing earnings that are better than estimates.
Nvidia is still a bargain
Another potential catalyst for the NVDA stock price is that it is a bargain based on multiple valuation metrics.
Data compiled by SeekingAlpha shows that the company has a forward price-to-earnings (PE) ratio of 42, higher than the sector median of 29, but much lower than the five-year average of 58.
On a non-GAAP basis, the company’s forward PE ratio is 42, also higher than the sector median of 29, but lower than the five-year average of 80.
Other valuation multiples also showing that the company is not as expensive as investors think. For example, the forward PEG ratio is 1.15, lower than the sector median of 1.66. This is an important number that includes the concept of growth in its calculation.
Meanwhile, the company has one of the best rule-of-40 multiples in Wall Street. Its growth rate is 55%, while the profit margin is 52%, giving it a multiple of over 100%. Still, this valuation approach is commonly used among SaaS companies.
Nvidia is also a bargain compared to other AI stocks. For example, Broadcom has a forward PE ratio of 80, while Palantir has a multiple of 295. Oracle stock has a forward PE multiple of nearly 50.
Nvidia stock price technical analysis
The daily timeframe chart shows that the NVIDIA stock price has been in a strong uptrend in the past few years. It recently crossed the important resistance level at $200, bringing its market capitalization to over $5 trillion.
Nvidia stock has now pulled back and is hovering near the support at $180. It remains above the 50-day and 100-day Exponential Moving Averages (EMA), a sign that the downtrend bullish momentum is continuing.
Therefore, the most likely scenario is where the stock resumes the uptrend and retests the year-to-date high of $213.
The post Nvidia stock price forecast: NVDA is extremely cheap ahead of earnings appeared first on Invezz
