Nvidia (NASDAQ:NVDA) may have bottomed out. The super fast graphic chip designer is up from a low of $184.79 and, as of May 3, it was below $200 at $196.02. Keep in mind that NVDA stock ended last year at $271.83. However, it all depends on the earnings release set for May 25 covering its fiscal Q1 ending April 30.
As it stands, 32 analysts now forecast that revenue will be $8.12 billion, 43% higher than a year ago at $5.66 billion. Moreover, 30 analysts on the Street expect that earnings-per-share (EPS) will hit $1.29. That will be 41% higher than 91 cents earned a year ago, according to Refinitiv (Yahoo! Finance).
For most other companies, these numbers alone would force their stock much higher. But this is Nvidia. The stock rocketed up over 123% last year. Investors expect high growth rates from this super fast-growing chip company.
In fact, Nividia is so popular now it is branching out much further than gaming as the main use of chips. It’s now into artificial intelligence, data centers, gaming and professional visualization. But now it’s moving out into autonomous vehicles and the metaverse applications for its chips.
It not only makes super-powerful GPUs (graphics processing units) but also CPUs and combined GPU and CPU products, as CNET recently reported.
Where This Leaves NVDA Stock
Given its high growth rates, this company is producing large amounts of free cash flow (FCF). Moreover, its FCF profitability is very high. Last quarter, its FCF margin rose to over 36% when it produced $2.76 billion in FCF on $7.64 billion in revenue.
This is an extremely high level, even for software and other tech companies. For example, in Q1 Microsoft (NASDAQ:MSFT) made $20 billion on $49.4 billion in revenue or 40% of sales.
Analysts now forecast $42 billion in revenue this year at Nvidia. With a 36% FCF margin, FCF will reach $15.1 billion. Using a 2% FCF yield metric, which is the same as multiplying FCF by 50x, its target market value will be $756 billion. That implies a 54.8% gain in NVD stock. This gives it a price target of $303.36 per share. That is a good return for most investors.
On the date of publication, Mark Hake did not hold (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.
