The Height of Expectations
Nvidia Corp. (NVDA) is set to reveal its fourth-quarter results following the market close on Wednesday. Gene Munster from Deepwater Asset Management offered insight into the company’s upcoming earnings report.
Munster highlighted that analysts are forecasting a significant increase compared to the previous year, with an average expectation of $4.56 per share on revenue of $20.37 billion, a sharp rise from 88 cents per share and $6.05 billion last year.
The company’s stock has experienced a meteoric rise of nearly 200% in the past year, ushering Nvidia into the third-largest valued position in the tech industry.
Pressures on the Horizon
As Nvidia prepares to disclose its financial results, the critical pressure point will be the growth outlook for the 2025 fiscal year. Munster emphasized that all eyes will be on this projection.
According to Munster, Nvidia is likely to outpace the estimated 236% growth for the fourth quarter due to improved supply. The company highlighted this improvement during its previous earnings call and anticipates continued progress throughout 2024.
Munster also pointed out that analysts are pegging 60% revenue growth for the 2024 fiscal year. Despite concerns about China, Munster believes this is achievable as he anticipates analysts will revise their expectations upward.
A Farther Horizon?
However, the forecast for the 2025 fiscal year is less optimistic, with Wall Street expecting a 16% revenue growth, a significant drop from the estimated 60% growth for the current year. Munster alluded to the impact of this declining growth rate on the stock’s current trading multiple, signifying investor apprehensions about future growth.
Following the fourth-quarter earnings release, Munster expects revisions to the earnings growth estimates, potentially raising the 2025 estimate from 20% to 25%. He highlighted that Nvidia’s current earnings multiple of 30 times the estimated growth rate far exceeds other market giants like Alphabet and Apple.
Impending Growth Drivers
Munster reiterated the potential for Nvidia’s sustained growth by referencing Jensen Huang’s recent mention of three growth drivers at the Microsoft Connect conference. These include the ongoing phase of AI with hyper scalers and AI startups, the enterprise wave, and the significant growth potential in heavy industries.
Huang also spotlighted the Sovereign AI wave, where countries will develop their own AI tailored to their intelligence and cultural contexts, reiterating Munster’s view that Nvidia can continue to grow higher for a longer duration.
Market Consequences
Nvidia concluded Thursday’s session down 1.68% at $726.58, according to Benzinga Pro data.
