NVIDIA Corporation (NVDA) just reported its latest earnings results. Nvidia’s third-quarter earnings report exceeded expectations, with revenue reaching $35 billion, up 94% year-over-year and 17% quarter-over-quarter. This strong performance translated into adjusted earnings per share (EPS) of $0.81, surpassing analysts’ forecasts of $33.2 billion and $0.74, respectively.
Why were analysts wrong again about NVDA? To answer this question, we have to revisit what happened last quarter. Three months ago, NVDA shares were trading at $125 and NVDA announced revenue of $30 billion, up 122% year-over-year and 15% quarter-over-quarter. The company also told investors that it expects this quarter’s revenue to be around $32.5 billion. NVDA stock initially plunged all the way down to $101 but ended up above $145 at today’s closing. Basically, the stock returned around 16% over the last 3 months which is almost identical to its quarter-over-quarter revenue growth rate of 15%.
A couple of hours ago NVDA announced that it generated $35.1 billion in revenue instead of the $32.5 billion it guided just 3 months ago. Its quarterly revenue growth rate actually accelerated from 15% to 17%, and the company guided for $37.5 billion in revenue for the current quarter. You know what this means? It will probably generate more than $40 billion in quarterly revenue and NVDA’s share price will probably return another 16-17% over the next 3 months and hit $170. I haven’t seen any signs of a slowdown in demand for NVDA’s chips.
I am Insider Monkey’s co-founder and its research director. We have been recommending a long position in NVDA since May of 2023 and the stock’s performance has been good to our subscribers. I also personally own a small position in NVDA shares. I believe NVDA stock will continue to outperform the market in the next 3 months, but this doesn’t mean that it is a great long-term investment. The stock’s current market cap is nearly $3.6 trillion and if I am right it will exceed $4 trillion in 3 months. This means investors expect NVDA to earn around $200 billion per year once it becomes a more mature company like Alphabet Inc (GOOGL) which is currently trading at a forward P/E multiple of 20. Is it reasonable to assume that NVDA’s quarterly profit can go from $19.3 billion today to $50 billion in a few years and then continue to grow at the same rate that GOOGL’s quarterly profit is growing?
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Disclosure: Long NVDA. This article was originally published at Insider Monkey.
