Yes, Nvidia stock is expensive – but Oppenheimer says it’s worth it

In less than a week – Wednesday, May 25 – Nvidia (NVDA) Due to its Q1 2022 earnings report. Average analysts are optimistic about the report, and also about the direction that Nvidia may offer, predicting that Nvidia will report a 43% increase this quarter to $ 1.30 per share, and promise investors a further 31% increase per quarter ($ 1.36 per share).

And one analyst thinks Nvidia could do better than that.

In preview of next Wednesday’s earnings report, Oppenheimer’s Rick Schaefer reiterated his NVIDIA stock’s outperform (i.e. buy) rating, even lowering its মাসের 50 price target from its 12-month price target to $ 300. (See Schaefer’s track record, Click here)

As the analyst explains, he looks at the “reverse” of the consensus forecast in the next few quarters. Not much to the contrary, however. Schafer actually thinks Nvidia could report only $ 1.29 per share next week, but predicts that Nvidia’s guidance for Q2 will call for আ 1.37 per share for earnings.

That’s why Schafer hasn’t lowered its price target, however. As analysts have pointed out, “group multiple compression” in the semiconductor sector means that investors are rewarding chipmakers with lower stock prices for their profits. This can be a problem limiting the share price increase going forward. In the near future, however, Schaefer still sees Nvidia stock as about 86% devalued.

Why does Schaefer think Nvidia stocks are still rising?

Currently, Nvidia dominates the business and is almost evenly divided into two main areas – data centers (including both artificial intelligence and used for cloud computing) and gaming. Chip sales at the data center, which Schaefer abbreviated as “DC”, accounted for 43% of the company’s revenue and is expected to see a 10% increase in sales in Q1. Gaming, which accounts for 45% of the business, should grow, especially after Nvidia unveiled its promised “Ada Loveless Performance Gaming GPU” later this year.

In short, Nvidia’s two biggest business proverbs are buzzing like oiled machines

Now admittedly, it still leaves evaluation questions to consider. According to Schaefer, Nvidia is expected to earn $ 5.51 per share this year and $ 6.56 per share next year. It works with the current year’s P / E ratio of this stock is 31, and a forward P / E is only 26. None of these ratings would be of concern if Nvidia is expected to maintain growing revenue at 78%. (As it is expected this year). With revenue growth slowing to just 19% the following year, however, a P / E ratio of 26 may be slightly higher for Nvidia payments.

Worse, Schafer’s estimates for free cash flow on Nvidia lag far behind the reported net income. According to analysts, Nvidia is generating around $ 0.28 in positive free cash flow for every 1 revenue – a “free cash flow margin” of 28%. That Words Okay, but this year it works on about $ 9.5 billion in free cash flow – for example – resulting in a value-to-free cash flow ratio of 45 – even higher than the company’s P / E ratio.

At that price, it’s actually an extension to justify $ 171 and change the price of Nvidia’s stock today – a share much less than $ 300 Schafer thinks it will cost a year from now.

Overall, Nvidia has a great reputation in the technology world and has not received less than 25 ratings from Wall Street analysts. This includes 20 purchases as opposed to 5 hold, for a strong buy consensus view. NVDA’s average price target is $ 315.23, which means a 96% uptrend from the মূল্য 160.7 trading price. (See NVDA Stock Forecast at TipRanks)

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Disclaimer: The views expressed in this article are those of the featured analyst only. Content is intended for informational purposes only. It is very important to do your own analysis before making any investment.

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