Nvidia’s (NASDAQ:NVDA) blowout earnings report just saved the stock market rally. But this doesn’t mean its too late to take advantage of the NVDA stock rally.
Expectations could not have been higher going into the print. Analysts had forecasted a 700% increase in the company’s earnings per share. Options trading activity on the stock skyrocketed, with traders betting that NVDA stock would move 11% up or down following the quarterly results. The market capitalization of Nvidia hit $1.8 trillion heading into the earnings report, surpassing both Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) in the process. Miraculously, Nvidia managed to beat expectations and issue strong forward guidance.
Markets, which fell for three consecutive days leading up to Nvidia’s earnings, rallied more than 2% the day after the print was made public. NVDA stock increased more than 15%, boosting its market value by more than $250 billion and pushing its market cap to $2 trillion. The better-than-expected results have given new life to the artificial intelligence trade and powered the market rally that began in spring 2023.
A Print For The Ages
Nvidia’s financial results for what was the company’s fiscal fourth quarter was an across-the-board beat. The company jumped the high bar that had been set for it in every respect. The chipmaker announced EPS of $5.16, up 769% year-over-year and ahead of the $4.64 expected among analysts. Revenue totaled $22.10 billion, up 265% from a year earlier and better than the $20.62 billion that was anticipated. Nvidia attributed the stellar results to white-hot demand for its microchips, or graphics processing units (GPUs), that are used to power AI applications and models.
Data center sales, which include the AI chips, increased 409% in fiscal Q4 from a year earlier to $18.40 billion and would have been higher were it not for American restrictions placed on exports of AI technology to China. The company’s gaming business, which includes graphics cards for laptops and personal computers (PCs), was up 56% year-over-year to $2.87 billion. The gaming business growth would have been incredible had it not been dwarfed by the AI chip sales. Nvidia’s guidance was also great, with the company forecasting sales in the current quarter of $24 billion. Analysts expected sales of $22.17 billion.
Room To Run
NVDA stock has run far. Less than two months into the year, the company’s share price is up 64%. In the last 12 months, the share price has risen 237% — more than tripling and leading the benchmark S&P 500 index throughout 2023. Through five years, the stock is up nearly 2,000%, outpacing every other mega-cap technology stock. Given the huge run, it’s natural for investors who don’t own the stock to feel that they have missed an opportunity with Nvidia and that the train has left the station and is now barrelling down the tracks. Think again.
Analysts see a lot more room for NVDA stock to run. Even before the latest earnings print, analysts up and down Wall Street were raising their price targets on the stock. Wells Fargo (NYSE:WFC), for example, raised its price target on the shares to $840 from $675 days before the results. The median price target on NVDA stock is currently $850, implying 8% upside from current levels, and most analysts have yet to officially revise their targets after earnings. Among the 59 analysts who cover NVDA stock, nearly 100% of them rate it a “buy.” There are no “sell” ratings on the stock currently.
Nvidia stock remains the most favored security on Wall Street this year and many point out that the company’s valuation continues to look favorable given its incredible and sustained growth. In fact, NVDA stock has the most affordable valuation among the Magnificent Seven tech giants.
Buy NVDA Stock
The AI trade is for real and we’re currently in the early innings of what promises to be a technological revolution. Nvidia isn’t just at the center of the revolution, its microchips and semiconductors are powering the revolution. To say that demand is high for the company’s technology is the understatement of the year. The only complaint other tech leaders have about Nvidia is that they can’t get enough of the company’s chips fast enough. With its growth showing no signs of slowing down and its stock continuing to move higher, there is still an opportunity for investors to take a position. NVDA stock is a buy.
On the date of publication, Joel Baglole held long positions in NVDA and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
