Nvidia fell by over 10% on Friday, and since the March 25 All-Time-High it is already down 19.8% (at closing prices). According to intraday prices, Nvidia has already fallen 21.77% (from the intraday high of $ 974 on March 8, 2024).
Let's check how the company looks from a fundamental perspective, to simplify let’s have a look at sales growth. Figure 1 shows Wall Street's expectations for revenue growth:
1) Immediately before the earnings were published on February 22, 2024,
2) Immediately after the publication of these earnings, and
3) as of April 19, 2024.
Current expectations are even higher than those after the publication of the results - analysts are constantly raising their expectations regarding revenue growth. That's good!
Figure 2 shows Nvidia's market cap against revenues. The company's rapidly growing market cap goes hand in hand with strong revenue growth.
Figure 3 shows the same relationship as the ratio (price to sales). As of April 19, the ratio dropped to 19.6 - and if we take the revenue expected by Wall Street in the next quarter (the company will publish its guidance on May 22, 2024) - the ratio drops to 17.8 - which is below the average for 2020-2023.
Figure 4 shows the Nvidia stock price with the earnings release dates plotted.
All in all, nothing to worry about business growth and Nvidia's valuation according to the Price to Sales ratio. As a reminder, the Price to Sales at the peak of the Cisco System stock price on March 25, 2000 was 63 - see Figure 5.
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