The bad news is that, unfortunately, yes. At least to its own valuation history for the last 4+ years. At a price of $1064.69, this is already the 88th percentile of the valuation from 2020-2024 according to the price to sales ratio. In other words, only 12% of the time during this period was Nvidia more expensive.
Below are some valuation points:
- at the median valuation point, the price should be $815 (-23.5% from today's price)
- at 75th percentile $952 (-10.9% from today's price)
- at 90th percentile $1,095 (+2.9% from today's price)
- at 95th percentile $1,157 (+8.7% from today's price)
- at 100th percentile $1,348 (+26.6% from today's price)
- at 25th percentile $719 (-32.5% from today's price)
To calculate the price-to-sales ratio, I used the annualized revenues from the next quarter (company's guidance). This approach reflects well the rapidly growing revenues. See Figure 1. Each quarter is shown separately.
Figure 2 shows Nividia's stock price on a logarithmic scale. A few weeks ago, investors had a moment of doubt and at the session on April 19, they sold Nvidia with a maximum decline on that day of even -11% at a price of $756.1. To date, the price has increased by over 40%.
Figure 3 shows how Nvidia's stock price reacted relative to the S&P500 after the earnings release. Each of the last 6 quarters has yielded a higher return than the S&P500. After the publication of the last results on May 22, we are now 12.2% relatively higher than the S&P500.
Finally, there is also good "news"... first, that in the short term, valuations do not have a major impact on the company's share price, and second, it can be expected with a high degree of probability that the bull market in Nvidia shares should last until the end of the bull market on the entire market (as was the case, for example, with Cisco Systems in the 1990s).
This does not mean that significant corrections are not possible (e.g. in April this year, when the drawdown on Nvidia’s shares was 22.4% (intraday) and 19.8% at closing prices).
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