What can be said about Nvidia (NVDA) that has not already been said? With year-to-date stock gains of close to 50%, crushing the 5% rise in the S&P 500 index, the market has run out of superlatives to describe the AI chip juggernaut.
Expanding that horizon by one year and three years, Nvidia stock has skyrocketed 222% and 390%, respectively. The company is set to report fourth quarter fiscal 2023 earnings results after the closing bell Wednesday. For investors who are thinking of taking profits ahead of the results, consider that the semiconductor giant ended 2023 delivering not one, not two, but three breathtaking quarters in a row. Meanwhile, despite the strong stock performance, the shares appear cheap.
Part of the appeal in Nvidia is the company continues to raise its profit forecast, demonstrating that the euphoria surrounding artificial intelligence (AI) and generative AI is more than just hype. Companies are scrambling to identify AI opportunities and/or establish their generative AI capabilities to either improve their market position or operate their businesses more efficiently. However, very few companies, particularly from an enterprise perspective, can realistically say they are where they want to be for widespread use. That is where Nvidia comes in.
Nvidia’s chips will help these corporations achieve their AI objectives, whether it be via productivity gains or efficiency from AI automation, suggesting there is still an extremely long growth runway ahead. This trend has already begun, evidenced by Nvidia’s most recent Q3 results where revenue, especially in the datacenter, surged almost three-fold (280%) on a year-over-year basis to $14.51 billion, while rising 41% from the second quarter. This supports the thesis that, as the stock has risen, so has its fundamentals. This is poised to continue on Wednesday.
For the three months that ended January, Wall Street expects the Santa Clara, Calif.-based company to earn $4.56 per share on revenue of $20.38 billion. This compares to the year-ago quarter when earnings came to 88 cents per share on revenue of $6.05 billion. For the full year, earnings of $12.36 per share would rise 270% year over year, while full-year revenue of $59.26 billion would rise 120% year over year.
The expected revenue and earnings growth for the quarter and full year has tech investors gushing over Nvidia. Nvidia’s third quarter numbers and Q4 guidance suggests there is a sort of relentless demand for AI, especially in the datacenter, where Q3 revenue surged almost three-fold (280%) on a year-over-year basis to $14.51 billion, while rising 41% from the second quarter. On the bottom line, Nvidia’s Q3 net income to rose to staggering $9.2 billion, up from $680 million in Q3 of 2022. That growth equates to a year-over-year increase of 1259% on a non-adjusted basis.
Even on an adjusted basis the profit growth equates to an almost 600% gain, rising from $1.45 billion to $10.02 billion. When adding the company’s revenue totals for the first three quarters of fiscal 2023 and factoring it’s Q4 guidance that projects almost tripling the revenue growth for the third quarter a year ago, Nvidia signaled that the AI party is far from over. That means Nvidia is projected to deliverer fiscal 2023 consolidated revenue of close to $60 billion.
Each reporting quarter, Nvidia is blowing away analysts’ estimates. The numbers across the board are breathtaking considering the consistently high expectations Nvidia continues to face each quarter. With the stock trading for just 24 times current forward estimates, it belongs in every growth portfolio for 2024 given the company’s strong fundamentals. On Wednesday Nvidia must nonetheless continue to tout its growth prospects for the next quarter and beyond.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Richard Saintvilus
After having spent 20 years in the IT industry serving in various roles from system administration to network engineer, Richard Saintvilus became a finance writer, covering the investor's view on the premise that everyone deserves a level playing field. His background as an engineer with strong analytical skills helps him provide actionable insights to investors. Saintvilus is a Warren Buffett disciple who bases his investment decisions on the quality of a company's management, its growth prospects, return on equity and other metrics, including price-to-earnings ratios. He employs conservative strategies to increase capital, while keeping a watchful eye on macro-economic events to mitigate downside risk. Saintvilus' work has been featured on CNBC, Yahoo! Finance, MSN Money, Forbes, Motley Fool and numerous other outlets. You can follow him on Twitter at @Richard_STv.
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