NVIDIA Corporation (NVDA) is set to unveil its fiscal 2024 fourth-quarter earnings on February 21. Its revenue is estimated to grow by 239.1% year-over-year to $20.52 billion. Additionally, the company’s EPS is expected to increase 425.8% from the prior year’s period to $4.63.

Moreover, in a strategic endeavor to bolster its prospects, NVDA unveiled a partnership with Australia’s Pawsey Supercomputing Research Centre on February 18. The collaboration integrates the NVIDIA® CUDA Quantum platform accelerated by NVIDIA Grace Hopper™ Superchips into the National Supercomputing and Quantum Computing Innovation Hub, amplifying NVDA's influence in quantum computing.

The groundbreaking NVIDIA Grace Hopper Superchip, a fusion of the NVIDIA Grace CPU and Hopper GPU architectures, promises unparalleled performance in quantum simulations. The simulations are crucial for addressing quantum computing's most pressing challenges, spanning algorithm discovery, device design, and the development of robust error correction, calibration, and control techniques.

Furthermore, NVDA's collaboration with Cisco Systems, Inc. (CSCO), announced on February 6, aims to deliver AI infrastructure solutions tailored for seamless deployment and management in data centers. The initiative equips enterprises with the robust computational power required to excel in the AI-driven landscape.

Enterprises worldwide are embracing generative AI to revolutionize their operations, and NVDA's partnership with CSCO facilitates streamlined access to cutting-edge infrastructure. By simplifying the procurement of essential AI resources, NVDA would empower enterprises to leverage the transformative potential of AI, positioning itself as a key enabler of technological advancement in the digital age.

Shares of NVDA have gained 28.8% over the past month and 46.8% over the past three months, closing the last trading session at $726.13.

Here are the financial aspects of NVDA that could influence its price performance in the near term:

Mixed Financials

During the fiscal 2024 third quarter that ended October 29, 2023, NVDA’s non-GAAP gross profit increased 308% year-over-year to $13.58 billion. Its non-GAAP net income and non-GAAP net income per share grew 588.2% and 593.1% from the prior year’s period to $10.02 billion and $4.02, respectively.

However, the company’s cash outflow from investing activities came in at $3.17 billion, compared to a cash inflow of $3.15 billion in the previous year’s quarter. Additionally, NVDA’s cash outflow from financing activities rose 20.6% from the year-ago value to $4.53 billion.

Solid Growth Record

Over the past three years, NVDA’s revenue and EBITDA increased at a CAGR of 44.8% and 63.3%, respectively. Its net income and EPS grew at respective CAGRs of 70.3% and 70.5%, respectively. Moreover, the company’s total assets and levered free cash flow rose at CAGRs of 26.3% and 63.8%, respectively, over the same time frame.

Optimistic Analyst Estimates

The consensus revenue estimate for the fiscal year ended January 2024 stands at $59.25 billion, signaling a 119.6% year-over-year increase. Likewise, the company's EPS is anticipated to witness a 271% uptick from the previous year, reaching $12.39.

Looking ahead, analysts anticipate a 58.7% increase in revenue for the fiscal year ending January 2025, with projections reaching $93.99 billion. Similarly, EPS for the current period is expected to experience a growth of 72.7% from the previous year, settling at $21.40.

Sound Profitability

The stock’s trailing-12-month gross profit margin and trailing-12-month EBITDA margin of 69.85% and 49.39% are 41.9% and 437.5% higher than the industry averages of 49.23% and 9.19%, respectively.

Moreover, the company’s trailing-12-month net income margin of 42.10% is significantly higher than the 2.25% industry average. Also, its trailing-12-month levered FCF margin of 31.46% compare with the industry average of 9.07%.

Stretched Valuation

In terms of forward non-GAAP P/E, NVDA is trading at 58.60x, 130.4% higher than the industry average of 25.44x. Its forward EV/Sales of 30.15x is 903.4% higher than the 3.00x industry average. Furthermore, the stock’s forward EV/EBITDA and forward Price/Sales of 54.96x and 30.27x are 248.4% and 908.1% higher than the industry average of 15.77x and 3.00x, respectively.

POWR Ratings Exhibit Mixed Prospects

NVDA’s outlook is apparent in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. Although NVDA boasts a B grade for Growth, underscoring its strong profitability, its Stability grade is less favorable, standing at a D due to a 24-month beta of 1.95.

Furthermore, the company holds an F grade for Valuation, aligning with its valuation surpassing industry norms. NVDA is ranked #20 out of 90 stocks in the Semiconductor & Wireless Chip industry. Click here to access NVDA’s Momentum, Sentiment, and Quality ratings.

Bottom Line

NVDA stands on the cusp of enduring growth, propelled by strategic partnerships set to elevate its prowess in quantum computing and AI infrastructure. Through the seamless integration of cutting-edge technologies and facilitation of resource accessibility, NVDA endeavors to fortify its position as a trailblazer in technological innovation.

However, giving prudent consideration to its present stability, lofty valuation, and the nuanced performance depicted in the most recent quarter, it could be wise to await an opportune entry point into NVDA.

How Does NVIDIA Corporation (NVDA) Stack Up Against Its Peers?

While NVDA has an overall grade of C, equating to a Neutral rating, you may check out these A (Strong Buy) rated stocks within the Semiconductor & Wireless Chip industry: Photronics, Inc. (PLAB), ChipMOS TECHNOLOGIES INC. (IMOS) and Everspin Technologies, Inc. (MRAM). To explore more Semiconductor & Wireless Chip stocks, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook > 

NVDA shares were trading at $726.13 per share on Monday morning, down $0.45 (-0.06%). Year-to-date, NVDA has gained 46.63%, versus a 5.09% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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