(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Just when you think investors couldn't get more bullish on Nvidia Corp. (NVDA), the analysts jump in and stoke the fire even more. Over the past 30 days, analysts have raised their estimates for the current quarter and the year, on both the top and bottom lines. Analysts are now looking for the company to grow earnings by 40 percent on the year, which previously had been forecast to increase by only 5 percent.
The upward earnings revision lowers Nvidia's valuation, making shares cheaper despite the stock price rising. Over the past 52 weeks, Nvidia stock has soared by over 134 percent, but its forward earnings multiple has fallen from the mid-50's to the mid-30's – a considerable decline. Given the company's expected rise in fiscal 2019 earnings, when adjusted for 2019 growth, the stock trades ata PEG ratio of less than 1, making shares a bargain.
Taking Up The Quarter On Strong Guidance
Analyst estimates are calling for earnings in the fiscal first quarter of 2019 to climb by 95 percent to $1.65 a share, and revenue to rise by 49 percent to $2.89 billion, versus the same period a year ago.
Nvidia had provided guidance when it reported results on February 8, calling for first-quarter revenue of $2.9 billion at the mid-point. Analyst had previously projected revenue to increase by 26 percent and earnings to rise by 32 percent. That's a massive jump.
Boosting The Year
The strong sentiment for the quarter has been carried out for the year, with the forecast for earnings to now grow by 40 percent to $6.85 a share, and revenue to increase by 27 percent to $12.37 billion. These are big revisions over past 30 days from where estimates had been just a short while ago, when the same analysts were calling for annual earnings growth of 5 percent on revenue growth of only 12.5 percent.
The growth at Nvidia has been unbelievable, and to think that its fiscal 2019 will continue the growth rate of the past few years seems mind-boggling. In fiscal 2018, Nvidia grew its earnings by an astounding 61 percent, while revenue increased by 41 percent. Analysts' newfound bullish outlook suggest the growth of the past will continue into the future.
The positive Wall Street sentiment speaks volumes and indicates that the stock has become a bargain when adjusted for growth, and is likely not done rising in 2018.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.