(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Nvidia Corp. (NVDA) stock has been one of the hottest stocks in the market with shares up by nearly 26% in 2018, and over 75% during the past year. It dwarfs the S&P 500's return of only 13.5% during the past 52-weeks. Analysts see shares of Nvidia rising even higher to a new record high with an average price target of almost $271, an increase of another 10.6% from its current price around $245.
The optimism in the stock comes after the company reported blowout fiscal first quarter 2019 earnings of $2.05 per share, nearly 24% better than analysts’ estimates of $1.66. Additionally, revenue came in at $3.207 billion, over 11% better than analysts’ estimates of $2.881 billion. (For more, see also: Nvidia's Breakout Seen Fueling 14% Stock Gain.)
Because of these strong results, analysts have increased their price target on Nvidia, by an average of 9% since April 17 from $249. Not only that but of the 38 analysts covering the stock 61% now rate shares a "buy" or "outperform," up from just 54% in the middle of April. Meanwhile, the number of analysts rating shares a "hold" fell to 32% from 38%. (For more, see also: How Nvidia Makes Money.)
Over the past 30 days, the earnings per share forecast for the fiscal second quarter have climbed by 11.25% to $1.83, an earnings growth rate of over 81% from a year ago. Additionally, revenue estimates have also risen by 5% to $3.1 billion, a revenue growth rate of almost 39% versus the same time last year.
Estimates for the full-year have climbed as well, rising by 14% over the past 30 days, while revenue estimates have climbed by 5.6%. For the year, forecasts are calling for earnings to jump by an astounding 57.7% to $7.76, on revenue growth of 34.5% to $13.06 billion.
History of Beating Estimates
The upward revisions and price targets is a testament to Nvidia’s ability to continually report better than expected results eight quarters in a row. It is hard to say that shares of Nvidia are expensive when trading at 29 times one-year forward earnings estimates, because of its growth rate, and its history of reporting better than expected results
The technical setup in Nvidia continues to be strong and suggests that shares may continue to rise over the longer-term. There is a strong uptrend that has been in place since June of 2017, with substantial support around $217. The only thing standing in the way of Nvidia rising is a resistance level around $254.
Analysts are still bullish on Nvidia, and it appears they have good reason to be.
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.