Jamie Spencer
Nvidia (NVDA) has been making waves in the stock market, with shares rising 16.2% over the past month and hitting a new 52-week high of $140.89 in the previous session. Since the start of the year, Nvidia’s stock has skyrocketed by 176.5%, significantly outperforming both the Zacks Computer and Technology sector, which gained 26.5%, and the Zacks Semiconductor – General industry, which rose by 124.7%. As Nvidia continues to dominate the market, investors are asking: what’s driving this impressive performance?
Nvidia’s Strong Earnings Record Powers Its Surge
One of the key factors behind Nvidia’s recent stock surge is its consistent record of positive earnings surprises. The company has not missed its earnings consensus estimate in any of the last four quarters. In its most recent earnings report on August 28, 2024, Nvidia posted earnings per share (EPS) of $0.68, beating the consensus estimate of $0.64. This consistent outperformance has instilled confidence in investors and has contributed to the stock’s continued upward momentum.
For the current fiscal year, Nvidia is expected to deliver earnings of $2.81 per share on $124.66 billion in revenues, representing a 116.15% increase in EPS and a 104.63% rise in revenues year-over-year. Looking ahead to the next fiscal year, analysts expect the company to report earnings of $3.73 per share on $174.35 billion in revenues, translating to a 32.75% increase in EPS and a 39.86% growth in revenues. These impressive projections have helped solidify Nvidia’s position as one of the top-performing stocks in the technology sector.
Valuation Metrics: Is Nvidia Due for a Pullback?
Despite Nvidia’s stellar performance, some investors may be wondering if the stock is overvalued at its current 52-week high. To assess this, it’s important to consider the company’s valuation metrics.
Nvidia currently trades at 48.7 times its current fiscal year EPS estimates, which is significantly higher than the industry average of 24.7 times. On a trailing cash flow basis, the stock trades at 110.4 times, compared to its peer group’s average of 11 times. Additionally, the stock has a PEG (price/earnings to growth) ratio of 1.17. While these numbers suggest that Nvidia is trading at a premium compared to its peers, its strong growth potential continues to attract investors.
In terms of Zacks Style Scores, Nvidia has a Value Score of F, but it boasts a Growth Score of A and a Momentum Score of B, resulting in an overall VGM Score of B. This indicates that while the stock may not be a top pick from a value perspective, its growth and momentum make it an attractive option for investors seeking long-term gains.
Zacks Rank: Nvidia Remains a Strong Buy
Another important factor to consider when evaluating Nvidia’s stock is its Zacks Rank. Currently, Nvidia holds a Zacks Rank of #2 (Buy), driven by rising earnings estimates. The Zacks Rank system encourages investors to focus on stocks with a rank of #1 (Strong Buy) or #2 (Buy), and with a VGM Score of A or B, Nvidia fits the bill for a strong investment opportunity.
Given these rankings, it seems that Nvidia shares have more room to run in the near term. Its growth trajectory, coupled with its strong earnings record, makes it a stock worth watching closely as it continues to outperform the broader market.
What’s Next for Nvidia?
While Nvidia’s current valuation might raise concerns about a potential pullback, its strong earnings performance, growth potential, and market leadership suggest that the stock could continue its upward trend. As the semiconductor giant navigates a rapidly evolving technology landscape, its ability to innovate and capitalize on emerging trends, such as artificial intelligence and gaming, will likely fuel further growth.
Investors looking for a stock with strong growth momentum should keep an eye on Nvidia, as it continues to deliver exceptional performance in the highly competitive tech sector.
Nvidia’s Momentum Signals Further Gains
Nvidia’s recent surge to a new 52-week high is backed by strong earnings, impressive growth forecasts, and favorable Zacks rankings. While its valuation may be high compared to industry averages, its growth story remains compelling. With a solid track record of exceeding expectations and significant room for future earnings increases, Nvidia appears to be well-positioned for continued success. As a leader in the semiconductor industry, Nvidia’s upward momentum is far from over.
