NVIDIA Corporation (NVDA) is poised to establish enduring dominance and foster immense growth through pioneering semiconductor advancements and strategic partnerships. However, does this position NVDA as the standout stock for unparalleled growth and gains this year? Let's find out…

NVIDIA Corporation (NVDA) exemplifies the pinnacle of the market's fervor for artificial intelligence. Renowned for its semiconductor innovations, NVDA’s chips are serving as the cornerstone of the AI landscape. Through strategic partnerships and collaborations, the company is fortifying its market leadership, consistently pushing the boundaries of technological advancement.

On March 7, NVDA's partnership with HP Inc. (HPQ) to integrate NVIDIA CUDA-X™ data processing libraries with HPQ AI workstation solutions signifies a significant advancement for the company. The collaboration is expected to enhance NVDA's position in the AI development landscape by providing accelerated data preparation and processing capabilities, strengthening its offerings and appealing to developers seeking efficient solutions.

Furthermore, the unveiling of StarCoder2 on February 28, in collaboration with ServiceNow, Inc. (NOW) and Hugging Face, highlights NVDA's commitment to innovation.

These unique alliances and groundbreaking advancements further validate NVDA’s competitive advantage on the technological front and open up new areas of business expansion into the future. As the company is enabling more rapid AI model development for wide-ranging applications, this further extends its competitive edge in the fast-crescent AI global marketplace that foretells sustained growth and further innovation.

NVDA shares have gained 18.8% and 92.9% over the past month and six months, closing the last trading session at $879.44.

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

Mixed Financials

In the fiscal fourth quarter, which ended on January 28, 2024, NVDA’s non-GAAP revenue increased 265.3% year-over-year to $22.10 billion. Its non-GAAP net income and non-GAAP EPS came in at $12.84 billion and $5.16 per share, up 490.6% and 486.4% from the prior year’s period, respectively.

However, as of January 28, 2024, NVDA’s total current liabilities amounted to $10.63 billion, up from $6.56 billion as of January 29, 2023.

Robust Historical Growth

Over the past three years, NVDA’s revenue and EBITDA increased at a CAGR of 54% and 81%, respectively. Its net income and EPS grew at respective CAGRs of 90.1% and 90.3% during the period. Moreover, the company’s levered free cash flow rose at a CAGR of 74.6% over the same time frame.

Optimistic Analyst Estimates

The consensus revenue estimate of $110.57 billion for the fiscal year ending January 2025 reflects an 81.5% year-over-year increase. Similarly, the company's EPS for the current year is expected to grow 90.3% from the previous year to $24.66. Moreover, the company topped the consensus revenue and EPS estimates in all four trailing quarters.

Sound Profitability

The stock’s trailing-12-month gross profit margin and trailing-12-month EBITDA margin of 72.72% and 56.60% are 49.1% and 515.3% higher than the industry averages of 48.76% and 9.20%, respectively. In addition, the company’s trailing-12-month levered FCF margin of 32.61% is 261.5% higher than the 9.02% industry average.

Stretched Valuation

In terms of forward non-GAAP P/E, NVDA is trading at 36.85x, 48.2% higher than the industry average of 24.87x. Its forward EV/Sales and forward EV/EBITDA of 20.10x and 31.67x are 588% and 110.7% higher than the respective industry averages of 2.92x and 15.03x. Also, the stock’s forward Price/Sales of 20.23x compares with the industry average of 2.93x.

POWR Ratings Exhibit Mixed Prospects

NVDA’s outlook is reflected 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. NVDA showcases impressive growth prospects, consistently earning an A grade due to its strong historical performance. However, its Value rating receives a less favorable D grade, mainly due to its lofty valuation.

In terms of Stability, NVDA encounters hurdles, evident in its F grade. This is emphasized by the stock's 24-month beta of 1.95, indicating higher volatility.

NVDA is ranked #22 out of 90 within the Semiconductor & Wireless Chip industry. Click here to access NVDA’s Momentum, Sentiment and Quality ratings.

Bottom Line

NVDA has the potential to establish itself as a leader in artificial intelligence and propel long-term dominance and growth through groundbreaking semiconductor advancements. Strategic alliances that augment the company's AI products are strengthening NVDA's technology supremacy and market leadership.

However, it could be wise to hold off until a more favorable entry time considering the stock's current valuation and stability.

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 and B (Buy) rated stocks within the Semiconductor & Wireless Chip industry: Cirrus Logic, Inc. (CRUS), ChipMOS TECHNOLOGIES INC. (IMOS) and Everspin Technologies, Inc. (MRAM). To explore more Semiconductor & Wireless Chip stocks, click here.

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NVDA shares rose $6.30 (+0.72%) in premarket trading Friday. Year-to-date, NVDA has gained 77.59%, versus a 8.34% rise in the benchmark S&P 500 index during the same period.

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About the Author: Aanchal Sugandh

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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