No. of Recommendations: 8
Nvidia at $458.07
Yes, this post is a bit of a joke : )
The stock price is hitting all time highs, and it at 4.2 times the 52 week low.
But also a bit serious.
Some people are well aware that I like really cheap companies, and am very averse to making rosy assumptions about the future.
Growth is fantastic and very important, but I don't like paying much for good things which haven't happened yet.
But a little column in the FT today was interesting:
"In the current quarter, Nvidia expects revenues to rise by around 170 per
cent on last year. Not only is this better than peers, it exceeds average
growth for start-ups too...Nvidia's data centre unit ' which includes
advanced AI chips ' grew 171 per cent to over $10bn in the last quarter.
...
Let's say the company makes $3.25 in net income per share this quarter,
on a GAAP basis. Given the revenue guidance, this seems eminently possible.
Annualise that, and the company is earning $13 a year. At the current price,
that's a forward price/earnings ratio of 36. Apple is at 27 and it is
increasing revenue at a low single-digit pace. The S&P 500 is at 20.
Relative to its growth, one might argue, Nvidia is cheaper than Apple or
even the market. What this week's earnings report showed was that while
Nvidia's valuation is high, it is absolutely not dotcom-crazy. (You could
argue, of course, that Apple is overvalued, or that big tech is, or that
the whole market is; maybe so; but what we are talking about here is relative
valuation.)"
The writer makes a pretty good case.
Let's say his earnings estimate is right. (and at this sort of growth rate, if it's not true now it probably will be soon). Rather surprisingly the future doesn't have to be all THAT amazing for things to work out OK.
Historically, a monkey with a dartboard could manage inflation + 6.5%/year by picking US stocks: the average real total return from the average stock in the average year.
To manage that in the next five years, Nvidia would have to manage flat margins and sales growth of 19-20%/year and an ending multiple of only about 19-20 times earnings.
I definitely would not bet on that personally because I am a pessimist and don't know the firm well, but it is far from impossible. Both figures are vastly lower than today's numbers, to start with. For whatever it's worth, Value Line anticipates EPS growth of 33.5%/year in the next 3-5 years, though from a much lower guess of 2023 numbers. Their forecasts are generally close to industry consensus.
For someone who believes in their business model's future and who is buying today, they are being aggressive, not foolhardy.
There are some truly crazy valuations in the market these days, but this isn't necessarily one of them.
The main risk seems to be that their biggest customers, who are very rich, hamper their growth by designing in-house replacements at a lower cost to them, or at a cost they think will be lower.
Jim
No. of Recommendations: 4
Nvidia at $458.07
Yes, this post is a bit of a joke : )
The stock price is hitting all time highs, and it at 4.2 times the 52 week low.
But also a bit serious.
Digging into some old posts ... did anyone take a flyer on this? (stock is at $810 and hit $950 after this post
tecmo
...
No. of Recommendations: 6
Nvidia at $458.07
The stock price is hitting all time highs, and it at 4.2 times the 52 week low.
But also a bit serious.
...
Digging into some old posts ... did anyone take a flyer on this? (stock is at $810 and hit $950 after this post
Yes, I bought a little and still have it.
But I didn't buy it then, so I paid much closer to the current price than to the price the day of my post : )
Jim
