Bull Of The Day: Nvidia (NVDA)

I last wrote about NVIDIA (NVDA - Free Report) as the Bull of the Day on January 2 as I gave Zacks Ultimate members an update on my fundamental case for "Why You Buy NVDA Between 40 and 50 Times Forward Earnings."

With analysts raising NVDA's EPS estimates for the coming year from a consensus $3.95 to $4.67 after their November quarterly report -- and several high end projections near $5.00 -- NVDA shares around $200 were trading about 40 times the most optimistic forward estimates.

So we saw every dip as an excuse to add more NVDA shares in my TAZR Trader portfolio. Here's what I told my members on December 27 about a potentially fading opportunity to still buy NVDA near $190...

As I've written numerous times, this is the one to own for AI engines and advanced HPC (high-performance computing) applications. NVIDIA builds systems-on-a-chip (SoC) that are fueling so many different bleeding edge industries from autonomous driving, robotics and big-data mining to cancer/genomic research, medical diagnosis and cyber-security that all require massively parallel architecture (MPA).

To explain the long tail of NVIDIA's growth and dominance within and connected to several technology industries, let's review what I wrote in mid-November...

Is NVDA Too Expensive at 50X?

Many investors wonder if the stock is still a buy as it now trades over 50 times trailing 12-month earnings.

As an NVDA investor, I have a bias that says "Yes, I would still be a buyer up to 50X forward EPS."

And, after this most recent quarterly report, as I go over the growth profile in all its different business segments and customers, I find multiple reasons to reinforce this view.

In sum, as long as the leading provider of gaming processors, High Performance Computing in data centers, and emerging AI technologies keeps delivering solid double-digit sales and earnings growth, along with upside surprises each quarter, then paying 48 times the current projection for next year's profits isn't a bad proposition.

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Disclosure: I own NVDA shares for the Zacks TAZR Trader portfolio.

Kevin Cook is a Senior Stock Strategist for Zacks where he runs the  more

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Barry Hochhauser 1 year ago Member's comment

Nice job, I'm bullish on $NVDA.

Craig Richards 1 year ago Member's comment

I fear the competitive landscape for $NVDIA is too uncertain to justify a buy as it now trades over 50 times trailing 12-month earnings.