Nvidia’s stock is currently trading at a relatively low price-to-earnings multiple of 31, making it one of the most cheaply valued AI stocks. Despite this, its forward earnings multiple is lower than that of other “Magnificent Seven” members such as Broadcom, Marvell Technology, and Arm Holdings.
Two main reasons contribute to Nvidia’s discounted valuation. Firstly, analysts may be underestimating the company’s future earnings power. According to Yahoo Finance data, Nvidia’s first-quarter earnings per share have trended modestly lower over the past 30 days, but its forward earnings multiple has not seen significant adjustments in over 60 days.
The other possible explanation is that investors are waiting for more concrete evidence of Nvidia’s growth before reevaluating its stock price. Despite the recent recovery from February lows, Nvidia’s shares have underperformed the S&P 500 this year. However, key analyst John Vinh notes that Nvidia’s unique position in AI/ML secular data center growth makes it well-positioned to dominate a rapidly growing market with significant barriers to entry.
With earnings season approaching on February 26, these valuation disparities may become more apparent. Yahoo Finance will be hosting a live Nvidia earnings special on the day of the release, providing real-time analysis and insights as the results come in.
Source: https://finance.yahoo.com/news/one-ridiculous-chart-on-nvidia-ahead-of-earnings-133020976.html