Historically known for making graphics processing units (GPUs) for computers, NVIDIA (NASDAQ: NVDA) has grown dramatically into a powerhouse in huge new industries in the past few years.
Because of the computationally intensive nature of rendering 3D models, graphics cards have proven to be remarkably good at handling artificial intelligence (AI), machine learning (ML), and high-performance computing (HPC), as well as being adept at cryptocurrency mining.
Thanks to these new market opportunities, NVIDIA stock has rebounded over 1,600% in the past five years, enabling a market cap of over $ 500 billion. The stock is currently trading at an all-time high of around $ 817, or roughly 96.5 times earnings, as investors price in high growth expectations for the future.
The average target price for NVIDIA stock among Wall Street analysts is $ 734.03, with a high of $ 900 and a low of $ 440.
NVIDIA (NASDAQ: NVDA)
Price: $ 819.48 (as of July 2, 2021)
Market capitalization: 510.536.040.000
NVIDIA stock forecast 2021
First, note that NVIDIA’s fiscal years are different from calendar years. The company ended fiscal year 2021 in late January 2021, and NVIDIA is currently in the middle of fiscal year 2022. All estimates below are presented based on fiscal years.
NVIDIA saw total revenue jump 53% to $ 16.7 billion in fiscal 2021, driven by strong growth in the data center market and continued strength in its core PC gaming segment. The COVID-19 pandemic has boosted the demand for home entertainment solutions such as games, and live streaming has emerged as an unstoppable megatrend.
|Market platform||Sales in fiscal year 2021||Year-on-year growth|
|Games||$ 7.76 billion||41%|
|Data center||$ 6.7 billion||124%|
|Professional visualization||$ 1.05 billion||(13%)|
|automobile||$ 536 million||(23%)|
|OEM and others||$ 631 million||25%|
|total||$ 16.7 billion||53%|
The consensus estimate for this fiscal year is revenue growth of 49% to $ 24.8 billion, which should translate into adjusted earnings per share (EPS) of $ 15.87. That means NVIDIA stock is now trading at roughly 51.5 times its estimated EPS for fiscal 2022.
NVIDIA Stock Forecast 2025
Wall Street is aiming for steady revenue growth in the years to come, albeit with some slowdown as the revenue base grows. According to analysts, NVIDIA is projected to have a compound annual growth rate (CAGR) of nearly 11% over the next five years.
Analysts expect the following by 2025 (fiscal year 2026).
|2022||$ 24.8 billion||49%|
|2023||$ 27.3 billion||10%|
|2024||$ 30.7 billion||12%|
|2025||$ 35.8 billion||17%|
|2026||$ 41.3 billion||fifteen%|
The bottom line, however, will be more bumpy as NVIDIA is aggressively investing in the business.
|year||Adjusted EPS||Year-on-year growth|
By and large, the global PC gaming industry is projected to grow from $ 5 billion in 2020 to $ 7.6 billion in 2025, a 10% CAGR, according to Research and Markets.
Meanwhile, AI and cloud computing will spur data center chip sales (NVIDIA recently unveiled its first specialized data center processor called “Grace”) and the rise in cryptocurrency prices is providing a strong incentive for crypto miners to keep investing in equipment.
NVIDIA Stock Forecast 2030
Further out, NVIDIA’s sales could exceed $ 50 billion in just a few years. Long-term forecasts are generally more speculative, as market conditions and competitive landscapes can change significantly.
This is how analysts see NVIDIA’s revenue for the next nine fiscal years.
|2027||$ 42.3 billion||2%|
|2028||$ 45.5 billion||8th%|
|2029||$ 48.5 billion||7%|
|2030||$ 52 billion||7%|
|2031||$ 55.1 billion||6%|
Profitability is expected to grow at a more steady pace towards the end of the decade.
|year||Adjusted EPS||Year-on-year growth|
NVIDIA Bull case
NVIDIA does incredibly well on its most promising opportunities as the company is at the epicenter of several secular megatrends.
It’s been a little over a year since NVIDIA completed the acquisition of Mellanox Technologies, a deal first announced in 2019 that will strengthen its position in HPC applications in the data center.
It is more controversial that NVIDIA is trying to take over the British chip designer Arm from the Japanese technology group SoftBank (OTC: SFTBY), a $ 40 billion transaction that could transform the wireless chip industry.
Arm occupies a unique position in the semiconductor value chain as its architecture powers over 95% of all smartphones. The proposed acquisition has sparked controversy as NVIDIA is currently a customer of Arm and critics fear the deal could undermine Arm’s neutrality.
NVIDIA’s Bull Case builds on continued strength in the gaming space – the company increased its discrete GPU market share to 81% in the first quarter, according to Jon Peddie Research – as well as expectations that the company can further expand its presence in the data center market. which has long been a stronghold for Chip Moloch Intel (NASDAQ: INTC).
If the company can complete the Arm acquisition, it will further cement NVIDIA as a formidable titan in the chip industry.
NVIDIA bear cover
There are many risks that threaten NVIDIA’s prospects. The planned takeover of Arm is also expected to face severe setbacks and an intensive regulatory review.
If regulators block the deal, it could hinder NVIDIA’s efforts, and NVIDIA would be charged a $ 1.25 billion termination fee if the deal fails.
While Intel’s competitiveness has lagged in recent years under former CEO Bob Swan, who has been criticized for focusing too much on financial results rather than technological innovation, the company hired former Intel executive Pat Gelsinger as its new CEO earlier this year a.
Gelsinger could reinvigorate Intel’s competitiveness, which would pose a threat to NVIDIA, especially in the data center market.
At the same time, modern micro devices (NASDAQ: AMD) also has its eye on data centers for HPC applications with the upcoming takeover Xilinx (NASDAQ: XLNX). AMD is also NVIDIA’s main competitor in the GPU market, and the rival has done very well under CEO Lisa Su.