Nvidia: Is the Price Unrealistic?
Antonio Ferlito | May 30, 2023 08:45AM ET
Nvidia (NASDAQ:NVDA), is the price unrealistic?
Over the past 2 years, the shares of Nvidia Corporation ( NASDAQ: NVDA ) have soared despite deteriorating fundamentals.
The use of artificial intelligence is becoming more widespread among large companies such as Google (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and AT&T (NYSE:T).
Their latest earnings calls indicate that they are starting to use generative AI in their products and services.
This is just a preview of what to expect in the near future.
We are witnessing the creation of a new speculative bubble, that of AI.
NVDA's value does not depend on its fundamentals, but rather on its future prospects.
After the semiconductor giant released better-than-expected first-quarter results, shares soared 20%, erasing any pessimism about future performance.
But from my data analysis, I notice that the profit growth rate has decreased and another question mark concerns the price/revenue ratio.
This ratio is one of the best indicators for assessing the health of a business, and generally, well-managed businesses have a ratio of between 2 and 4.
This figure shows whether the company is making profits and is a great way to measure a company's profitability.
Here we have an incredibly high price-to-sales ratio of 28 making Nvidia Corporation stock one of the most expensive in the history of the market.
The market is booming and we know that in the short run markets can be irrational.
We expect AI to bring big business, as can be seen from the growth in financials.
In the first quarter of fiscal 2024, Nvidia's data center revenues reached a record $4.28 billion (+14% annually and +18% quarterly) due to strong interest in using the GPU Hopper and amperometric architectures for generative AI automation and advanced language models.
The predictions are truly amazing.
Nvidia expects record revenue of $11 billion in the second quarter, well above the initial estimate of $7 billion.
This projection indicates a 64% annualized sales increase for the company in the coming quarter.
Nvidia Corporation is an incredible company with exceptional quality products and led by an innovative CEO in the semiconductor industry.
However, the $380 price that investors have to pay for Nvidia stock is too high.
Given the current circumstances, with the Fed continuing to reduce liquidity in the financial markets and the bank credit tightening cycle continuing, it is not advisable to take risks by purchasing such expensive stocks.
According to my calculations, the stock is worth $230.
The financial bubble in the US market is slowly coming to an end and I think this value should be taken into consideration in the coming months.
Get The News You Want
Disclaimer: The information and content provided on this site should not be considered as an invitation to invest in the financial markets. The Content is a personal opinion of Dr. Antonio Ferlito.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.