Nvidia is set to report its fiscal 2025 third-quarter earnings on November 20, and investors are eagerly awaiting the release of key data points. Two factors stand out as crucial in understanding the implications for investors: Nvidia’s share buyback program and the impact of its new Blackwell GPU.
Firstly, let’s examine the $50 billion buyback program. Through the first half of fiscal 2025, Nvidia has repurchased 162.1 million shares for $15.1 billion, leaving an additional $7.5 billion authorized under its existing plan. In August, the company announced another $50 billion authorization, which could be seen as a bullish sign if the funds are actually used to repurchase stock at reasonable valuations.
However, past data suggests that Nvidia’s stock has traded below its average price-to-earnings (P/E) and price-to-free cash flow (P/FCF) multiples. If the company fails to use the new authorization to buy back shares at more attractive prices, it may be perceived as a PR stunt.
On a separate note, the Blackwell GPU is generating significant hype, with CEO Jensen Huang stating that demand for the product is “insane.” Morgan Stanley analysts project $10 billion in revenue from the launch alone. However, there are concerns surrounding Super Micro Computer, one of Nvidia’s closest partners, which has been embroiled in a scandal and may affect supply-and-demand dynamics.
Nvidia’s management has reportedly moved Blackwell orders away from Super Micro, but it’s unclear how this will impact growth in the short term. As a result, investors should be cautious about near-term headwinds for Nvidia’s growth due to the supplier issue.
Despite these concerns, Nvidia’s stock has been on a tear over the last couple of years and is expected to continue its upward trend driven by Blackwell’s success. The key question now is when management might consider buying back stock at a sound financial move, given the potential for valuation expansion and increased prices due to tailwinds from Blackwell.
Source: https://www.fool.com/investing/2024/11/10/2-numbers-ill-be-looking-for-on-nov-20-when-nvidia