2024 will go down as another great year for stocks in the trader’s almanack. However, what won’t be recorded is just seven stocks comprised ~54% of the S&P 500 total gains (~24% with two trading days remaining). It’s a bit like golf – you only need to record the final score – not how you did it. However, the how matters (not just the ‘what’). This post will address the question of what to pay for one the most popular stocks today – Nvidia (NVDA). The asking price is $137 at 32x forward earnings. But does that represent great value given its growth assumptions?
NVDA
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It Wouldn’t be September Without a Few Bumps
September has started in a very typical September fashion. Down! It’s traditionally the worst month of the year in terms of returns. But that’s not a bad thing… As longer-term investors – it’s great when things go on sale. That’s when we get to sharpen our pencils on higher quality businesses. And for those who missed out four weeks ago (where you needed to act fast) – it’s possible you will get another chance this month. As I wrote recently – the rapid 10% surge in equities over 4 weeks did not fill me with a lot of confidence…
Nvidia Beats Expectations… But Disappoints on Guidance
Rarely has a single stock been so ‘hyped’ coming into earnings as Nvidia. The leading AI chip maker is widely seen as the ‘AI’ barometer… making their earnings more important than most. My expectation was they would handily beat Q2 revenue and earnings – however issue a softer-than-expected guide. It turns out that’s what we got. Make no mistake – this was another exceptionally strong quarter. And despite the softer guide – “only” falling 6.4% should be considered a good result. This post talks about whether Nvidia is still worth a bet post their results. The answer is it depends on your timeframe… but long-term (3+ years) the answer is absolutely yes.