NVDA Stock Analysis: Nvidia Is Just Getting Started

Stocks to buy

Nvidia (NASDAQ:NVDA) shares jumped 15% in early afternoon trading on Feb. 22. The NVDA stock analysis leading into the AI-focused chip designer reporting its Q4 2024 results suggested a massive quarter was likely. CEO Jensen Huang didn’t disappoint and up went its shares to an all-time high of $781.54 before falling back slightly as the day wore on. 

In early February, I asked whether Nvidia stock could hit $1000 in 2024. “I do like Nvidia’s stock for a long-term hold of forever. However, we know that Nvidia’s stock has been prone to decent-sized corrections, so that’s always a possibility in the months ahead,” I wrote on Feb. 11. “If you want to buy Nvidia stock, consider using options to reduce the capital required to gain a potential entry point.”

I have no problem admitting that I’m a huge fan of Nvidia and its CEO, Jensen Huang. Nothing surprises me about its ability to over-deliver when it aggressively calls on future revenue and earnings. It’s remarkable. 

So, if you ask me if I still feel NVDA stock will hit $1,000 in 2024, I’d say I do. 

The million-dollar question: What must it do to deliver for shareholders? Here are my thoughts on the subject. 

NVDA Stock Analysis: Don’t Sweat Earnings

According to the prevailing NVDA stock analysis, revenue in the fourth quarter to be $20.4 billion. It beat that estimate by $1.7 billion, or 8.3%. On the bottom line, the consensus estimate was $4.60 a share. It delivered $5.16, 12.2% higher than analyst expectations.

You can get all excited about the fact it beats on both the top and bottom lines. Given Nvidia’s relatively nosebleed valuation, you can even argue that the beat wasn’t big enough.

However the size of the beat is irrelevant. Analysts are scrambling to catch up to what’s happening in Nvidia’s business. That’s the nature of sell-side research. They are forever chasing their tails. Honestly, it’s a thankless job.

The words of Jensen Huang and CFO Colette Kress about the future are far more relevant than anything that happened in the past quarter, even the past year. 

What Happens in 2025 and 2026 Is What’s Important

Don’t get me wrong, going through the numbers from the fourth quarter is essential to get an idea of how strong its business is. There’s no question that 22% sequential revenue gains and 28% sequential EPS gains are impressive, as was its Data Center revenue increasing by 27% from Q3 2024. 

You’d have to be naive to think this growth isn’t exceptional.

In the Q4 2024 conference call, Huang spoke about data center expectations for the future.  

“We’re at the beginning of two industry-wide transitions and both of them are industry wide,” Huang said.  

“The first one is a transition from general to accelerated computing. General-purpose computing, as you know, is starting to run out of steam. … And with accelerated computing, you can dramatically improve your energy efficiency. You can dramatically improve your cost in data processing by 20 to 1. Huge numbers. And of course, the speed. That speed is so incredible that we enabled a second industry-wide transition called generative AI.”

So, Huang said that Nvidia saves companies time and money, two critical ingredients in any successful product or service. 

At the end of the conference call, Huang said that Nvidia sees the installed base of data center infrastructure doubling in the next five years because of AI. The company is ideally positioned to benefit from this infrastructure build-out. 

The Bottom Line

The company only guides one quarter at a time. 

However, what a quarter it will be, with revenues in Q1 2025 expected to be $24.0 billion, nearly 9% higher than in 2024’s final quarter, with non-GAAP net income of $13.47 billion [$24 billion times 77% gross margin less $2.5 billion in operating expenses plus $250 million other income times 83% (17% tax rate)] based on the CFO’s Q1 2025 outlook in her commentary. 

Something tells me Nvidia’s almost being conservative in its growth projections for the first quarter. I’d be shocked if it didn’t deliver sequential growth of over 9%.

Nvidia is a must-own stock for the long term. But as I said in the intro, NVDA is prone to decent-sized corrections, so make sure you have some dry powder to buy more when that happens. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

Articles You May Like

The 7 Best REITs to Buy in April 2024
3 AI Stocks to Buy for Long-Term Growth in Q2 2024
Yikes! Don’t Get Trapped as Super Micro Computer Stock Rolls Over.
3 Low-Beta, High-Reward Stocks That Have More Room to Run
If You Can Only Buy One Hydrogen Stock in April, It Better Be One of These 3 Names