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NVIDIA Stock Up 155% The Year: Still a Buy? Related ETFs to Consider
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Semiconductor behemoth NVIDIA (NVDA - Free Report) stock has gained about 155% this year, has added about 179% in the past year, and surged 2600% in the past five years. NVIDIA’s market cap has attained the level of $3 trillion this year.
The stock currently trades at a Price/Earnings (P/E) (trailing 12 months) of 55.59X, way higher than the 8.14X P/E (ttm) recorded by Semiconductor – General industry. The NVIDIA stock is currently trading at price/book (most recent quarter) of 51.82X, again much higher than industry figure of 1.33X. Price/Cash Flow of NVIDIA stock stands at 99.02X versus 11.11X recorded by the underlying industry.
In fact, the industry is currently ranked in the bottom 18% of 251 industries. But does this mean NVIDIA shares have any threat ahead? No. Let’s tell you why?
NVIDIA’s Huge Market Share
NVIDIA is the world leader in AI chip design and software, controlling between 80% and 95% of the market, according to Reuters. Tech giants like Microsoft (MSFT - Free Report) , Google (GOOGL - Free Report) , Oracle (ORCL - Free Report) and Meta (META - Free Report) are its clients. Autonomous vehicle companies like Tesla (TSLA - Free Report) depend on NVIDIA’s chips. NVIDIA's AI chips, like the H200, are used to train large language models and power inference. Huge demand has been creating shortages of GPUs.
High Demand for Next-Generation Blackwell AI Chip
NVIDIA CEO Jensen Huang said in an interview with CNBC that demand for the company’s next-generation artificial intelligence chip Blackwell is “insane.” Chief Financial Officer Colette Kress said in August that the company expects to ship several billion dollars in Blackwell revenue in the company’s fourth fiscal quarter. Jensen said Nvidia intends to update its AI platform each year to increase performance by two to three times.
The company’s earnings are expected to grow 116.2% in the current year ending in Jan. 2025 versus the 21.5% expected decline in the industry’s growth rate and 15.67% growth expected to be recorded by the S&P 500. The growth rate, forever, is expected to cool next year. Over the next five years, NVIDIA is expected to see a 41.70% growth rate versus 17.80% in the industry.
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What Do Analysts Believe Ahead of Earnings?
NVIDIA is expected to report earnings on Nov. 19, 2024. NVIDIA currently has an Earnings ESP of -0.27% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
One analyst out of 15 boosted the earnings estimate of NVIDIA for the to-be-reported quarter over the past 30 days and 10 analysts did that over the last 60 days. The earnings estimate for the current quarter is 74 cents, up from 68 cents recorded 60 days ago.
Based on short-term price targets offered by 40 analysts, the average price target for Nvidia comes to $149.99. The forecasts range from a low of $90.00 to a high of $200.00. The average price target represents an increase of 22.09% from the last closing price of $122.85, as of Oct. 3, 2024.
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NVDA ETFs in Focus
If you are worried about NVIDIA’s negative ESP and still take advantage of the AI boom and prospective high growth trajectory, you can stay invested in the NVDA-heavy semiconductor exchange-traded funds (ETF). The ETF approach minimizes the company-specific concentration risks.
Some NVIDIA-heavy ETFs include Strive U.S. Semiconductor ETF SHOC, VanEck Vectors Semiconductor ETFSMH, Technology Select Sector SPDR FundXLK, Grizzle Growth ETFDARP and TrueShares Technology, AI and Deep Learning ETFLRNZ.
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NVIDIA Stock Up 155% The Year: Still a Buy? Related ETFs to Consider
Semiconductor behemoth NVIDIA (NVDA - Free Report) stock has gained about 155% this year, has added about 179% in the past year, and surged 2600% in the past five years. NVIDIA’s market cap has attained the level of $3 trillion this year.
The stock currently trades at a Price/Earnings (P/E) (trailing 12 months) of 55.59X, way higher than the 8.14X P/E (ttm) recorded by Semiconductor – General industry. The NVIDIA stock is currently trading at price/book (most recent quarter) of 51.82X, again much higher than industry figure of 1.33X. Price/Cash Flow of NVIDIA stock stands at 99.02X versus 11.11X recorded by the underlying industry.
In fact, the industry is currently ranked in the bottom 18% of 251 industries. But does this mean NVIDIA shares have any threat ahead? No. Let’s tell you why?
NVIDIA’s Huge Market Share
NVIDIA is the world leader in AI chip design and software, controlling between 80% and 95% of the market, according to Reuters. Tech giants like Microsoft (MSFT - Free Report) , Google (GOOGL - Free Report) , Oracle (ORCL - Free Report) and Meta (META - Free Report) are its clients. Autonomous vehicle companies like Tesla (TSLA - Free Report) depend on NVIDIA’s chips. NVIDIA's AI chips, like the H200, are used to train large language models and power inference. Huge demand has been creating shortages of GPUs.
High Demand for Next-Generation Blackwell AI Chip
NVIDIA CEO Jensen Huang said in an interview with CNBC that demand for the company’s next-generation artificial intelligence chip Blackwell is “insane.” Chief Financial Officer Colette Kress said in August that the company expects to ship several billion dollars in Blackwell revenue in the company’s fourth fiscal quarter. Jensen said Nvidia intends to update its AI platform each year to increase performance by two to three times.
This Year’s NVIDIA Stock Split
Further, NVIDIA completed a 10-for-1 stock split on June 7, which made its shares more affordable to a wider range of investors, including the ones who make small trades, thereby increasing liquidity and sparking a retail frenzy. Some analysts believe NVIDIA is on track to become the first $10 trillion company.
Inside NVIDIA’s Earnings Growth Rate
The company’s earnings are expected to grow 116.2% in the current year ending in Jan. 2025 versus the 21.5% expected decline in the industry’s growth rate and 15.67% growth expected to be recorded by the S&P 500. The growth rate, forever, is expected to cool next year. Over the next five years, NVIDIA is expected to see a 41.70% growth rate versus 17.80% in the industry.
Image Source: Zacks Investment Research
What Do Analysts Believe Ahead of Earnings?
NVIDIA is expected to report earnings on Nov. 19, 2024. NVIDIA currently has an Earnings ESP of -0.27% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
One analyst out of 15 boosted the earnings estimate of NVIDIA for the to-be-reported quarter over the past 30 days and 10 analysts did that over the last 60 days. The earnings estimate for the current quarter is 74 cents, up from 68 cents recorded 60 days ago.
See the Zacks Earnings Calendar to stay ahead of market-making news.
NVDA Stock Price Target
Based on short-term price targets offered by 40 analysts, the average price target for Nvidia comes to $149.99. The forecasts range from a low of $90.00 to a high of $200.00. The average price target represents an increase of 22.09% from the last closing price of $122.85, as of Oct. 3, 2024.
Image Source: Zacks Investment Research
NVDA ETFs in Focus
If you are worried about NVIDIA’s negative ESP and still take advantage of the AI boom and prospective high growth trajectory, you can stay invested in the NVDA-heavy semiconductor exchange-traded funds (ETF). The ETF approach minimizes the company-specific concentration risks.
Some NVIDIA-heavy ETFs include Strive U.S. Semiconductor ETF SHOC, VanEck Vectors Semiconductor ETF SMH, Technology Select Sector SPDR Fund XLK, Grizzle Growth ETF DARP and TrueShares Technology, AI and Deep Learning ETF LRNZ.