NVDA Q3 Earnings Highlights: What Investors Need To Know

Benzinga

Nvidia's third-quarter results vouch for the company's dominance in AI accelerator chips.     Despite competition, Nvidia will likely maintain more than 85% share in generative AI accelerators in 2024, says an analyst.

Transcript

00:00 But let's go to NVIDIA and just think about this for a second, because this stock is growing

00:05 earnings so quickly that it's actually cheaper on a multiple basis now at an all-time high

00:11 than it was when the stock was $300 a share.

00:15 And that's insane to think about.

00:17 You know, the biggest question is, so you did the calculation, I did the calculation,

00:21 Monty Mitch, on the forward earnings.

00:23 And again, when you're calculating off forward earnings, it's a guess, because we don't have

00:26 the actual earnings.

00:27 We're just going off estimates.

00:29 We're going off projections from the company.

00:31 So we're going off, you know, what we think they can do.

00:35 So Monty Mitch, tell us how you came up with your multiple and what you come up with for

00:39 NVIDIA forward.

00:40 Yeah, so I'm going to put this on the screen too, to make it a little bit easier for everybody

00:44 out there to kind of visualize and see it.

00:46 Right.

00:47 So what I did is I went to the estimates, right, trying to find what the full year estimate

00:52 was for the next 12 months, right.

00:53 And the consensus, right, the kind of the average there.

00:57 So I grabbed this from, and I'll give them a shout out, Seeking Alpha has a nice little

01:02 calculation there.

01:04 So I grabbed a 1713, right.

01:06 And of course you got to get the price that it was, right.

01:09 So I got the price this morning, 504.75.

01:12 It really depends on what price you grab, right, because the price is always changing,

01:17 right.

01:18 So at this point, I mean, this brings the forward PE ratio to 29.46, right.

01:23 The average in technology usually stands between kind of like 20 and 30 times or estimates.

01:30 Of course, we could compare this to Apple, right, that has a forward PE of 28.98.

01:37 So there's your argument, right, Dennis?

01:39 Is this a value stock?

01:40 I mean.

01:41 Yeah.

01:42 And it all depends on those estimates.

01:44 So it depends how it goes.

01:45 So I was looking at the high and the low.

01:47 The low consensus seems to be about 16.

01:50 So if you got 16, it's 32.

01:52 The high estimates are like 24.

01:55 Like there's some analysts out there that are saying you can make $24 next year, Joel.

01:58 If it makes 24, 25, things are going to be like 21.

02:02 Now I kind of, you know, was thinking more in the middle.

02:04 So I was like, I went 19 on my calculation when I said 26 times.

02:08 Tim Seymour was on CNBC Fast Money last night.

02:11 He says that they make 20 just going in the middle, you know, between the 16 and the 24,

02:15 the low estimates on the analyst and the high estimates on the analyst.

02:18 Then it's 25 times.

02:20 But in any regard, 21 times, 25 times, 29 times.

02:23 People who are saying this is trading 100 times earnings don't know what they're talking

02:27 about.

02:28 This is not trading 100 times earnings anymore.

02:30 They're growing earnings.

02:31 If you look at last year's earnings, sure.

02:33 But I mean, they just made over $4 in this quarter.

02:36 So it's trading 100 times almost this quarter.

02:39 So I mean, it's fairly easy to come up.

02:41 That's probably, you know, like it sounds like, you know, AI isn't going away unless

02:45 we have this recession of all recessions last year.

02:48 I'm still calling for a recession.

02:50 I don't think, you know, the earnings are going to just completely fall off a cliff.

02:54 Now, the argument here is there's a lot of pull forward.

02:58 So maybe the pull forward, you know, where everybody is ordering right now to get ahead

03:03 of this AI boom, maybe earnings actually, you know, maybe the growth really slows significantly

03:08 next year.

03:09 Maybe it actually declines because of all the pull forward.

03:12 This is a cyclical business.

03:13 There's a lot of balls to juggle here.

03:15 But you know, there is an argument to be said that they are growing earnings so quickly

03:20 that this is gone from being a nosebleed growth stock into a value stock just because they

03:26 grew the earnings this much.

03:27 I mean, they were making like $4 last year, Mitch.

03:30 Now they're going to make, you know, what are they going to make when they add it all

03:32 up here, like 16 on the year, like 15 on the year?

03:36 Where are they on the, they're almost like nine bucks right now.

03:38 They got another quarter to go.

03:40 So I mean, and the big quarter usually is the last quarter.

03:43 The end of the year.

03:44 Yeah.

03:45 So, you know, Johan, Johan's fan in the chat, you know, and he's taking the other side.

03:49 We're making assumptions here.

03:51 He says, why do we assume these, these earnings will last forever?

03:55 Well, the markets, I mean, you have to, you know, when you're investing, you do it, then

04:00 you have to make, you know, some adjustments, you know, based on the information that you're

04:05 getting here.

04:06 But you know, if we think, if you think AI is a bubble and we're not going to, so if

04:12 you're of the opinion that AI is not changing the world and we're not going to be talking

04:16 about AI in five years, then you sell Nvidia.

04:19 If you're of that opinion, I am not of that opinion.

04:22 I think AI is the internet.

04:24 I think it is going to continue to grow.

04:26 I think Nvidia is going to be the player in AI going to, it is already.

04:30 And I think it remains that I think competition will come, but the thing is, this is going

04:34 to grow so much.

04:35 AI is here right now.

04:37 If it grows to here, it's like Tesla arguing, you know, Tesla, think about how many people

04:41 hated Tesla, you know, when it was, when it was like, literally, you know, we have to

04:46 split twice, you know, go back to like $20 or $30.

04:50 And, you know, and the thing was trading.

04:52 And if we go with these pre splits, like it's all confusing because it's split so many times

04:55 now it's really like $5,000 a share.

04:58 But I can remember when the stock was 120 and there were some analysts out there saying

05:02 this could make $20 a share.

05:03 Well, it ended up doing it and it was a huge value stock back then, you know, and now it's

05:08 now it's went up now and I don't think Nvidia is going to go to that exponential growth

05:11 because Tesla was a much smaller company at that point in time.

05:14 Nvidia is already a large company.

05:16 It's harder for large companies to grow like this.

05:19 But I think there's an argument to be said.

05:20 I don't think the argument is there anymore.

05:23 This is a nosebleed valuation.

05:25 That's what I have.

05:26 Let's bring Apple into the discussion here, Dennis, because, you know, I mean, for a long

05:31 time, you know, Gene Monster came on the show and just said, you know, this thing is just,

05:35 you know, it's just not getting credit.

05:37 It's not trading at a high enough valuation and it caught up.

05:40 So, you know, it make the you know, make the comparison there.

05:45 I mean, Nvidia, I mean, I can remember Apple's growth and everything, but man, this is just

05:51 an Apple had the same problem.

05:53 Apple had a low P.E. forever because it was growing.

05:57 The stock was going up like 50 percent, 60 percent a year.

06:01 But the earnings were growing faster because the iPhone just accelerated so much that the

06:05 actual stock couldn't keep up with the earnings growth.

06:08 You were seeing that in Nvidia.

06:09 The stock cannot keep up with the earnings growth.

06:11 So as the stock price goes higher, the P.E. is going down because the price isn't going

06:15 up as fast as a growing earnings.

06:17 So that E is going up faster than the P, which is bringing down the P.E.

06:21 So I mean, it's a very interesting, interesting, you know, to compare to Apple and back when

06:27 Apple was 2010.

06:28 Now Apple has no growth.

06:30 It's trading basically the same forward multiple as Nvidia with with no growth.

06:35 So I mean, even if you think Nvidia growth is going to slow, I mean, I'd rather have

06:40 Nvidia with some growth as opposed to Apple with no growth.

06:43 So I'm making the argument of Nvidia over Apple.

06:45 Full disclosure, I'm still on Nvidia.

06:47 Yeah, I bought it back at 408 for the same arguments.

06:51 It was it was it was the who was it?

06:56 I mean, the Tory funds, Dan Niles.

06:58 It was Dan Niles on CNBC back in October saying that this thing is trading 26 times forward

07:04 earnings.

07:05 This was when the stock was 410.

07:07 It's still trading 26 times.

07:08 But, you know, it's obviously the prices went up a lot, but the earnings have went up even

07:12 more.

07:13 So he was arguing that Nvidia is a no brainer down here.

07:16 And I'm like, I listen to Dan Niles, a guy, a smart man.

07:19 And I said it on the show back in October.

07:21 I talked about Nvidia talking about them leading.

07:24 So I didn't just start talking about this today.

07:26 If you go back to the October shows, I talked about Nvidia multiple times saying I kind

07:30 of want to buy this stock.

07:31 Remember me saying I kind of want to buy it.

07:33 We did a discussion.

07:34 And then I did buy it.

07:36 What's going to lead?

07:37 You know, what is going to lead the you know, if we have the next bull market and that you

07:43 were talking it and you said and I think it was really close to that day that when you

07:48 bought it, the price action.

07:51 Let's just talk about the price action real quick.

07:55 It was I mean, you could it started to go up and I'm looking like, OK, why is it this

07:59 thing five, 10 bit?

08:00 You know that that I was thinking and then they slammed it.

08:04 And it's kind of hard because it's this gray line right here.

08:08 If you were a straddle now, the straddle was 36 and it closed right around 400.

08:14 So it didn't get to that straddle price.

08:16 It only got to 468.

08:19 And then, you know, it just then they rebounded here.

08:22 And now it's like it's like it didn't even report.

08:25 It's up 58 cents.

08:26 We did make a new high this morning at five or seven.

08:31 I just think you had, you know, some sellers out there, people that played the big run.

08:36 Just I think offers were stacked.

08:38 But I mean, it's holding a bid here at 500.

08:41 We'll see what the all time high in the regular session was made yesterday at five or five

08:46 forty eight.

08:47 So we'll keep an eye on that.

08:49 And then the all time closing high that was made on the 20th at five or four or nine.

08:54 But if this thing gets over the next couple of days, if this thing gets a 500 bid, then

08:59 you just got to get the hell out of the way.

09:01 It's a big day for it.

09:03 If you're a day trader, I don't know if it's going back to 480.

09:06 I don't know if it's I mean, we got the long.

09:07 I don't have it on for a trade.

09:09 I can't call the path, you know, perfectly here.

09:13 But I think two years from now, Nvidia stock is a lot higher.

09:17 I think two years from now, NVIDIA's stock is a lot higher, and that's why I'm long it.

09:21 [BLANK_AUDIO]

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