Nvidia’s Stock Dynamics: Analyzing Recent Performance Factors

Nvidia (NVDA) has recently captured attention as one of the most searched stocks on Zacks.com. Analyzing the factors influencing the stock performance in the upcoming weeks is essential for investors.

In the last month, Nvidia’s shares have returned -6.8%, while the Zacks S&P 500 composite showed a slight decline of -3.6%. The Zacks Semiconductor – General industry, to which Nvidia belongs, has experienced a similar downturn, with a 6.7% loss. Investors are particularly concerned about the potential future direction of this stock.

Understanding Earnings Estimate Revisions

While media buzz can affect a stock’s short-term movement, fundamental factors are crucial for long-term investment decisions. At Zacks, we prioritize changes in a company’s earnings projections as they fundamentally influence the fair value of the stock.

We analyze the revisions made by sell-side analysts covering Nvidia and how these changes reflect current business trends. Increases in earnings estimates typically lead to higher fair valuations, which attracts more investors, resulting in price shifts. Empirical findings highlight a strong correlation between earnings estimate trends and short-term stock price movements.

For the current quarter, analysts expect Nvidia to report earnings of $0.93 per share, marking a substantial increase of +52.5% from the same period last year. Notably, the Zacks Consensus Estimate has risen by +2.7% over the past 30 days.

The consensus earnings estimate for the current fiscal year stands at $4.40, indicating a change of +47.2% compared to the prior year, with a +4.5% increase over the last month. Looking ahead, the estimate for next fiscal year is $5.48, representing a +24.6% rise year-over-year, which has also seen a +4% upward revision recently.

Employing our proprietary rating system, the Zacks Rank, we assign Nvidia a ranking of #2 (Buy). This ranking reflects the positive changes in consensus estimates alongside additional factors related to earnings.

The chart below illustrates the progression of Nvidia’s forward 12-month consensus earnings per share (EPS) estimate:

12 Month EPS

Revenue Growth Projections

While earnings growth is a critical indicator of a company’s health, sustained profitability also relies on revenue growth. It is challenging for any company to maintain increasing earnings without concurrent revenue growth. Therefore, understanding a company’s revenue potential is vital.

In Nvidia’s case, the consensus revenue estimate for the current quarter is $43.22 billion, projecting a +65.9% year-over-year increase. The forecasts for the current and next fiscal years are $198.36 billion and $243.2 billion respectively, which correspond to increases of +52% and +22.6%.

Recent Performance and Surprise Analysis

Nvidia’s latest reported revenue was $39.33 billion, reflecting a remarkable +77.9% increase year-over-year. Earnings per share for this period was $0.89, up from $0.52 a year earlier.

The company’s revenue surpassed the Zacks Consensus Estimate of $37.72 billion by +4.26%, and the surprise in EPS was +5.95%. Nvidia has consistently outperformed consensus EPS estimates for the last four quarters and has exceeded revenue expectations in each case.

Valuation Assessment

When evaluating potential investments, assessing a stock‘s valuation is crucial. The analysis involves determining if a stock’s current price reflects its intrinsic value and growth prospects adequately.

Comparing valuation multiples like price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) relative to historical performance and peer benchmarks can provide insights on whether a stock is overvalued or undervalued.

As part of the Zacks Style Scores system, the Zacks Value Style Score assigns Nvidia a grade of D, indicating the stock is trading at a premium compared to its peers. For detailed valuation metrics driving this grade, click here.

Conclusion

The factors discussed here, along with further analysis available on Zacks.com, could assist in evaluating whether it is prudent to pay attention to Nvidia amidst market discussions. Notably, its Zacks Rank of #2 implies the stock may outperform the broader market shortly.

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NVIDIA Corporation (NVDA): Free stock analysis report.

This article was originally published on Zacks Investment Research.

Zacks Investment Research

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.