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Nvidia Corporation (NVDA) continues to rule the semiconductor industry. The artificial intelligence (AI) era has just begun, increasing demand for Nvidia's high-quality chips. As AI advances, demand will continue to rise in the coming years. Given that Nvidia dominates this space, the company should continue to generate strong profits.
The stock gained an exceptional 238% in 2023, outperforming the tech-heavy Nasdaq Composite's ($NASX) gain of 44.5%.
And it's not just AI that is driving the stock price gains. Nvidia has maintained the quality of its products and continues to innovate to strengthen its financials over the last two decades, resulting in a staggering 39,150% return over the last 20 years.
Halfway through February, the stock is up 46.6% year-to-date, easily outperforming the Nasdaq's 6.8% increase. Nvidia will release its fourth-quarter and full-year results on Feb. 21, and many analysts have raised their targets for the stock in anticipation of stronger growth in its Data Center segment. Let's see what analysts expect from this quarter.
2024 Could Be Another Strong Year For NVDA Stock
Nvidia reported strong results in all three quarters of fiscal 2024 so far, driven by high demand for its innovative high-performance graphics processing units (GPUs), which are used in almost every industry.
In the third quarter, total revenue increased by 206% from the year-ago quarter to $18.1 billion. Plus, adjusted earnings per share (EPS) also rose six times to $4.02 from the year-ago quarter.
Although U.S.-China trade concerns loomed over Nvidia last year, the company has found a solution to that. According to Reuters, Nvidia intends to launch a modified gaming chip that meets China's import regulations. However, Nvidia anticipates a slight impact on Data Center segment revenue in the fourth quarter, as China accounts for 20%–25% of that segment's revenue.
Keeping this impact in mind, management anticipates Q4 revenue of around $20 billion (plus or minus 2%). Investors will also likely be looking for insights as to how Nvidia intends to address the situation in the long run, and whether it will continue to have a significant impact in the coming quarters.
Meanwhile, analysts predict revenue of $20.46 billion and earnings of $4.61 per share for the quarter. For the full fiscal year 2024, analysts estimate revenue growth of 119.5% to $59.2 billion, while earnings could increase by 270.5% to $12.38 per share.
Aside from its Data Center segment, which dominates its business, the company has plenty of room to grow in the Automotive segment. AI is also helping to accelerate the growth of the automotive market. Nvidia's strategic partnership with Foxconn to produce next-generation electric vehicles (EVs) will serve as a growth catalyst. Furthermore, EV maker Li Auto has adopted Nvidia's Drive Thor platform, while GWM (Great Wall Motor), ZEEKR, and Xiaomi have chosen the Drive Orin platform to power their next-generation automated vehicles.
For fiscal 2025, analysts foresee Nvidia’s revenue and earnings massively increasing by 58.3% and 71.8% year-over-year, respectively. Currently, Nvidia is trading at 34 times forward fiscal 2025 estimated earnings, compared to its five-year historical average price-to-earnings ratio of 65.1x.
Based on the estimated 78% earnings growth, the valuation does not seem expensive.
What Do Analysts Say About Nvidia?
On Feb. 16, Barclays increased its target price for Nvidia stock to $850 from $650. Additionally, Oppenheimer analyst Rick Schafer also increased the price target to $850 from $650. The analyst expects a 22% increase in Nvidia’s Data Center revenue for the fourth quarter, with Schafer stating, “We see several structural tailwinds driving sustained outsized top-line growth, including generative AI, DC/AI accelerators, and autonomous vehicles. We believe these factors justify its valuation.”
Furthermore, Loop Capital Markets initiated a “buy” rating on the stock with a new Street-high target price of $1,200, which implies an upside potential of 65.2% over the next 12 months.
There is no disputing Wall Street's optimistic outlook for Nvidia stock. Overall, NVDA maintains its “strong buy” rating in the analyst community. Out of the 38 analysts covering the stock, 33 have a “strong buy” recommendation, with two “moderate buy” ratings and three “hold” ratings. Nvidia has outpaced the average analyst target price of $680.93.
Nvidia Is a Long-Term Investment
Commanding an impressive 80% market share in chips, Nvidia's legacy as a semiconductor giant is likely to last for a long time. While Advanced Micro Devices (AMD) and Intel (INTC) are increasing their investments in AI, it appears that no other company will be able to challenge Nvidia's position at this time.
Given the anticipated hyper-growth, Nvidia remains relatively inexpensive, even for investors who believe it may be too late to invest in the stock. Another strong quarter could propel the stock even higher in the blink of an eye. Now could be the perfect time to buy and hold this hyper-growth stock forever.
On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
