Is Nvidia Stock a Trick or Treat?
It's scary season, but monster growth or a monster correction awaits the market-cap king.
Nvidia (NVDA) is currently trading at a market cap of $5.2 billion, making it a major player in the AI revolution. The company's recent growth has been impressive, but investors are wondering if this is a trick or a treat as we head into the final two months of the year and beyond. One concern is Nvidia's historically cyclical nature, with revenue declining 7% in fiscal 2020 despite its early success as a gaming-focused company.
Additionally, the sustainability of Nvidia's high-margin results is questionable, with net margins now only slightly higher than they were a decade ago. Another worry is the end of the AI revolution itself, as well as local opposition to data center build-outs and cyclical financing deals. However, Nvidia's revenue has been accelerating sharply, and its guidance models a slowdown for the fiscal third quarter.
Analysts expect a similar jump in revenue for the quarter. Nvidia's current price is 13 times next year's Wall Street profit target, but the company has authorized $150 billion in share repurchases. Despite the current gloomy market sentiment, it's difficult to argue that demand for Nvidia will thin soon, and there is even a possibility that the future may be even better than current projections.
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