Nvidia Stock Isn’t Cheap, But Further Upside Awaits

To say the least, there’s a lot going on with Nvidia (NASDAQ:NVDA) stock. Investors of Nvidia have plenty of topics to talk about, including an upcoming proposed share split which has been a hot topic on financial message boards lately.

Nvidia (NVDA) stock logo on a smartphone.
Source: Allmy / Shutterstock.com

It’s perfectly understandable if traders want to discuss the stock split. There’s no denying that it’s a major event which could propel the Nvidia share price higher, at least in the short term.

However, I won’t be focusing on that event today. For more information on the stock split, I highly recommend reading InvestorPlace contributor William White’s essential guide with 16 things that NVDA stock investors need to know.

Instead, we’ll concentrate on the headline that I feel is being buried: NVDA stock, while appearing to be expensive, might actually be a pretty good bargain right now.

A Closer Look at NVDA Stock

I should mention the proposed share split one more time, as it could drastically alter the NVDA stock price soon.

But really, a four-for-one split shouldn’t change the fundamental metrics, including Nvidia’s price-earnings ratio.

As I’m writing this, the stock’s trailing 12-month P/E ratio is 76.9. That’s higher than I, as a value investor, would typically feel comfortable with.

Furthermore, NVDA stock’s 52-week range is $347.10 to $676.62. Today’s price is at $673, which is awfully close to the 52-week high.

Again, this would usually make me hesitant to recommend a long position. After all, the idea is to “buy low, sell high,” and Nvidia shares aren’t exactly “low” at the moment.

Therefore, dip buyers might choose to wait for the next share-price pullback, like what happened in early March and in the first half of May.

On the other hand, long-term investors shouldn’t have difficulty identifying reasons to believe that NVDA stock has much more gas in the tank, so to speak.

Crypto Chips

Known as a fabless chipmaker, Nvidia is sometimes considered a pioneer among video game graphics processing unit (GPU) manufacturers.

The company is also expanding into artificial intelligence (AI) enhanced chips, which can be used in data centers, supercomputers, driverless cars and other applications.

And in February, Nvidia broadened its horizons even further. That’s when the company announced the release of new chips for mining cryptocurrency.

Reportedly, this new chip lineup is known as the CMP, or cryptocurrency mining processor.

It’s only been a few months, but so far, Nvidia’s venture into crypto chips seems to be working out quite well.

During the conference call associated with Nvidia’s first-quarter fiscal 2022 earnings, CFO Colette Kress stated that the company’s CMP sales totaled $155 million.

Broadly Optimistic

Hence, it’s fair to say that Nvidia is off to a strong start in the crypto chip market. And despite wildly volatile cryptocurrency prices, Kress asserted that CMP sales are staying strong.

Altogether, Nvidia expects to take in $400 million in revenues from its CMP segment during the company’s fiscal-2022 second quarter .

This fits into a broadly optimistic outlook for that quarter. Specifically, the company is expecting revenues of $6.30 billion, plus or minus 2%.

That’s an ambitious outlook, but it’s not unjustified. Fiscally speaking, Nvidia’s momentum is simply undeniable.

For the quarter that ended on May 2, Nvidia generated a whopping $5.66 billion in revenues. That’s an 84% over the year-ago period, as well as a 13% sequential increase.

Plus, the company recorded record quarterly revenues for its Gaming, Data Center and Professional Visualization platforms.

The Bottom Line

Value-focused investors might be concerned about the P/E ratio of NVDA stock.

This concern should be outweighed by Nvidia’s impressive revenue growth, however.

Besides, a bold push into the crypto chip market should assuage the skeptics’ concerns that Nvidia’s momentum could slow down anytime soon.

On the date of publication, David Moadel 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.


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