Why Is Nvidia (NVDA) Stock Down After Earnings? | Buy The Dip? | NVDA Stock Analysis! |

the majority of the stocks in the S&P 500 ended negatively with some Mass anticipation of what the Nvidia postmarket results would mean and what we can in fact see they did report some very strong Revenue growth around 122% which they talk about being due to the massive demand they are still having for their data chips and this is something we will run through in today's episode to take a closer look at the numbers but what we can fact the postm market this company is down around 7% we're going to take a look at their report which was very positive but unfortunately there are some issues that companies like Nvidia face when they are essentially priced to that Perfection point and we want to understand where are the issues where do they lie and ultimately whether or not Nvidia is a company we should be considering adding to after the drop on what we would consider to be fairly good earnings so first things first let's take a look and the headlines do tell us that they did beat Wall Street expectations and on top of that they provided stronger than expected guidance for the current quarter and we already understand that Nvidia is essentially the market leader in what we do believe to be an artificial intelligence boom which is going to be here for a very long time and in fact we could argue that Nvidia is leading the global market into this space now when we look at the exact numbers first thing to note looking very good on the earnings per share 68 cents versus 64 which the market was anticipating do remember when we have looked at this company over the last four quarters they have beaten analist targets so they continue that Trend and we also see some very strong growth just over 30 billion to the Top Line when the market as we can see we're anticipating just below 29 so a very healthy double beat and in fact for the next quarter they're anticipating 32.5 billion which is massive again more growth expected not just from the same quarter last year but also from the quarter they have just essentially reported and we can fact see this would translate to an 80% increase from the same quarter last year now you could argue the revenue has started to slow down we see a 100 and 22% increase on an annual basis something we have been spoiled with Nvidia as we can see for the last 3 years on a year-on-year basis they have been increasing their Top Line in excess so more than 200 % a lot of people will not worry and say that 122% is still very strong but there will be some analysts out there who may be thinking that the top line is going to start to reduce very significantly and that can play a part in what we will come to discuss shortly we also note when we do look at their bottom line net income in fact looking very healthy 16.6 billion that is more than double what they produced in the same quarter last year which as we can see came in at 6.18 billion so look looking very healthy and as we can see their market cap is more than 3 trillion and whilst they were once the most valuable public company although for a short time they are now second to Apple and if you do believe this boom is going to continue it may not be a very long time before we do see them take that number one spot now we'll continue to touch upon some of these details in a bit more depth shortly but we also just want to highlight this company's historical performance as we mentioned just something to reiterate they are down 7% in the post Market we'll be interesting to see how that forms when the Market opens tomorrow over the last year still very strong up 168% and no surprises for everyone who has been following this stock up 24765 just over the last 10 years now when the market does open we will see this come down slightly so so they are now trading in the mid to uppr end of the 52e range and we also know Wall Street still maintains that strong buy Seeking Alpha a hold with Quant giving it a hold now we just have to mention this they do offer a yield very small at .3% but just a few months ago in fact from their previous quarter they did increase that dividend at 150% and we do know their forward P around 46.5 S&P around 23 and we'll also briefly touch upon how that forward PE will drop over the subsequent few quarters so let's take a continued look at the numbers that they did report first thing to note here on a total basis as you mentioned more than 30 billion to that Top Line looking very good a lot better than what the market had anticipated now from the previous quarter 26 billion so again a very healthy increase and from Q2 of last year 13.5 billion so that is more than double so again very healthy and some of the numbers that institutions as well as Market analyst will be looking at is that data center growth continuing we see the growth in the gaming sector as well as the professional visualization and in fact both the other two sectors as well not something we actually saw in the previous quarter we noted that the gaming had come down in q1 from 2865 in Q4 as well as the professional visualization and oam and others so very nice to note not just on the data center which is the key highlight for the market but also in the other sectors as well their Top Line has been increasing and we also want to just point out some concerns that we do have about this company even though some of these numbers do look very strong and very healthy first thing to note as we said 30 billion in this quarter now when we look at it on a quarter on quarter basis it is up 15% one thing to bear in mind analysts do like to be forward-looking they will look not just over the next quarter but also over the next year and they will be hoping that they continue to grow at a very strong rate whether or not double digit will still satisfy them on a quarteron quarter basis that is something we will need to wait and see but ultimately year onye up 122% remember over the last 3 years they were up more than 200% on a year-on-year basis so a few question questions just to ask yourself and one of the main things that I was a little bit disappointed in is essentially this gross margin 75.1% that is lower than the previous quarter of 78.4 and one thing I did mention in previous episodes on Nvidia is not just the Topline growth that we will want to focus on but also either increasing margins or at least maintaining it so a little bit of a worry that they have started to decrease that margins are they in effect reducing their prices to increase their top line is that something that is going to cause an issue further down the line so just something to think about although when we do zoom out and look over the last year it is still up from 70.1% from last year same quarter to 75.1 as always these are just questions to consider bottom line net income 16.6 billion a lot better in fact just from the previous quarter up 12% and we can see up triple digits from the same quarter last year EPS also looking very healthy up 12% on a quarter on quarter as well as triple digits in terms of a year- on-year basic so overall there are a lot of positives and we wouldn't say there are many negatives just a few things to consider with that valuation that we will come on to shortly as well and now we just want to talk about some of the issues that companies do face when they are essentially priced in for Perfection and as we said overall earnings did look very healthy but one or two things that we do want to discuss the first one is forward-looking and that is essentially the sales they're anticipating for the current quarter that we are in they believe it will jump around 80% to 32.5 billion bear in mind as we just discussed now it's gone from triple digits of in excess of 200% down to 100% level and now they are anticipating this to come down further to 80% and whilst they are anticipating 32.5 even though analysts were expecting around that level at 32.5 we have some analysts who believe the actual Whispers from the market were hoping for a higher level of 33 to 34 which is why we did in effect see that drop in the postm market and it doesn't just stop there in terms of what the market was hoping for we also have the discussion around the margins that we did touch upon as well it slipped around 75.1% from the 78.4 from the previous quarter so that is a little bit of a worry is it going to continue to fall are we going to see a company like Nvidia come down to the double digigit Revenue growth as well as margins coming down from the high rates that we have previously seen and in fact for the full year we can clearly see here they expect their gross margin to be in the 70% range and we can see the market was hoping from 76.4 so just a few things that you do need to consider here with this company but ultimately we still believe this is a very high quality company but the valuation has to be correct are we buying a high quality company that continues to deliver at the right price is it undervalued or in effect are we looking at a company that is actually inflated and we should consider to either pull back our position or just hold it and maintain it for now now before we continue just to let you know we have released our latest lest free weekly article where we run through three undervalued high quality growth companies if you want access to this or any others completely free do click on that pin comment below where you can sign up and read straight away we've also released our 35 undervalued stocks for your consideration in the month of August where we run through those that sit within our own portfolios as well you can grab a copy by clicking on the pin comment below and I will be sending the September Edition on Monday now continuing our analysis the other thing we want to talk about is both insiders and institutions are they buying are they selling well starting off with insiders ownership at 4.23% we have around 832 Million worth of sales over the last year and when we look at it from a quarteron quarter basis we see some very large sales just over the last two 313 million in quarter 2 313 million in quarter 3 around 339 million in quarter 2 and when we look exactly at who these insiders are in fact the majorities are the CEO now his more recent sale was the 9th of August where he sold a 120,000 share tranch and we can see that netted him just over $12 million now he has done this quite a few times over the last few months and this shouldn't take us by surprise this is something that was already pre-arranged and he had disclosed this and ultimately he does hold a very large position in this company so not something we would consider bearish ultimately Insider selling isn't a bearish signal Insider sell for many reasons whether it's personal or financial what we ideally want to spot by looking at inside movement other buys as they do give us a sense that they are buying because ultimately they believe the share price will go up now when we look at the same thing for the institutions what we can see here is 65% with around 7.3 billion worth of sales over the last year with significant amount more buys over the same time period and in fact when we look at the more recent quarter Q2 257 billion worth of buys with only 9 million worth of selles so ultimately institutions do love this company they are continuing to buy but one thing we do want to make clear on this channel is that you should never buy or sell based on institutions always do your own due diligence before executing on any companies now we did take a look at their Topline Revenue but we also want to point out their bottom line their growth over the last 10 years has been incredible from 4.7 billion in January 2015 to around 60.9 just in that more recent annual report so growth does look tremendous and one thing we just want to highlight in today episode just in this more recent quarter that they just released their earnings today they released 30 billion of revenue for one quarter just look at their last four year 60 billion so they made already what they made in half a year in 2024 in just one quarter that is some very large growth and when we take a look at their bottom line again looking very strong going from 631 million to around 30 billion so this is a company that is increasing rapidly both Topline and both bottom line but the main question we need to understand in relation to the valuation do we believe they can continue to grow at the rapid rate both on the top line as well as the margins and on top of that their bottom line which is ultimately very important to shareholders as well we also want to highlight the health of this company from their latest earnings their total cash versus their total debt 4.6 billion in 2015 around 31 in their latest quarter so they do hold a lot of cash one thing that we actually haven't mentioned already already is that they have just announced a 50 billion share buyback program which is very good news for investors essentially returning excess cash to your pockets giving you a larger portion of control of the company and we are going to take a look at some of those metrics shortly but as always when we do look at this number in isolation it doesn't tell us anything which is why we do take a look at that in comparison to their total debt numerically and directionally going from 1.4 billion in 2015 to around 11 billion which as we can see their cash position is much much larger it wouldn't even take them one day to pay off all of their debt and N of cash on hand so even though this has been increasing over longer term no worries whatsoever we also want to just show you some of their earnings reports from the previous quarters now over the last four quarters they have beaten analyst Targets in fact Quarter Two they just released as we mentioned they beat on the EPS so last five quarters a 100% track record and moving forwards into the next three quarters they are still expecting some strong double digit growth to the earnings per share and ultimately if they do hit their January 2026 EPS the forward P will come down to around 33 which you could argue for a high quality company is a lot more reasonable than the forward P that we currently see then taking a quick look at some gradings the first one the valuation underlining metrics based on the updated numbers and figures now they do get an F rating no surprises here because ultimately for example the on a non-gaap basis of 46.5 is much higher than the sector median of 23.6 so this means if you are paying right now for one share of Nvidia you are paying in comparison to the sector as a whole a 97% premium and as always whether it's 97% or 9000% there are reasons why companies do trade at a higher level and you could argue it is Justified it is warranted but that is the conclusion we need to come to before buying these shares and we can see regardless of what metric you use for the valuation purpose this company is graded very poorly because they do trade at a significant premium now when we take a look for example at the growth we can see they have been giving an A+ so this is one part of the warranty that is Justified for this company in fact the last year on year we saw 208% just based on the more recent quarter looking back over the last 12 months even though this has dropped around 122% we can still see much higher than the sector of 3.42 moving forward as we said around the 80% level still significantly higher and one of the things we like to draw your attention to the EPS per share over the next 3 to 5 years 37% growth looking a lot better than the sector Med around 14.7 so lots of positive so far granted though the valuation is a little bit costly and when we look at the profitability well an A+ gross margin still looking very strong at 75% given the sector is at 49 bottom line looking absolutely phenomenal of 53% way better than the sector of 3.63 and finally the main thing we want to draw your attention to one of the reasons they can do those massive dividend grow those massive share BuyBacks they cash from operations of 40.5 billion is significantly better than the sector of 96 now a quick conclusion for this part of the analysis we still have a strong buy from Wall Street still a double hold from the other two analysts an F on valuation A+ on growth with an A+ on profitability finally then before we look at some underlining metrics just to compare Nvidia to others in this sector I'm sure you've heard of the more TSM broadcom AMD corcom txn what we do note over the last year with essentially the Peaks and troughs Nvidia has faced they are still the best performing up 168% and no surprises when we do look over the last 5 years as well as the last 10 years no other company comes close so whether or not that will continue over the next 10 20 30 years whatever your investment Horizon is no one knows past performance isn't essentially an indicator of the future but historically this company has performed performed very very well now for those that just want to know the yield is very small but the dividend safety score still sits at 89 safe as we mention that triple digit growth to the dividend of 150% in May 24 and in the last recession well what we do note when looking at the key metric so from the Great Recession 079 they paid no dividend so no comparative data negative 35% recession sales which was well below the average of the snp's -12 and they ultimately also underperformed -78 when the S&P came in at -55 as we mentioned great growth just over the last few months but over the last 5 years as well as the last 10 years it hasn't been that great essentially dividends aren't something that this company focuses on it is just more of a benefit in combination with the share price growth hence why now they'll only have one year of consecutive increases although they have been paying a divid for the last 11 to 12 years now dividend yeld theory is something we do look at on this channel we look at a lot of dividend companies however this yield is very small not a focus so we won't draw your attention to this we'll instead look at the forward PE and what we can see from this the current forward p is pretty much in line with the 5-year average of 42.6 so you could argue that currently right now based on this metric alone this company is reasonably valued but as always we never conclude on valuation until the end of the episode we then get to the free cash flow power as always we look at that over the earnings which is susceptible to manipulation by management through accounting below 50 % for the industry I mean 1% in 24 2% over the next 12 months it's understandable why this company can continue to increase this div at a triple digit rate and the free cash flow per share something we do love to look at on this channel we want consistent increases over the long term with Nvidia it has been increasing rapidly in fact over the last 10 years but we do know the mass growth came from 23 to 24 and over the next 12 months for the full year fy2 we are expecting more than 100% growth this is still a company right there in the initial phases of this massive growth then we look at these sales growth well this is one thing you do need to consider as we just mentioned it has been growing at a very rapid rate it has been growing at a very rapid rate and as we did look at the numericals we did see 5 billion in 2015 going up to 61 in 2024 and a large number is anticipated for fy2 so it is still moving in the right direction just a question remains how long they can keep this consistency for as we talked about already they have announced a 50 billion share buyback program but over the last 10 years you will notice you would have seen shares outstanding increase so they would have diluted your position although we would say that if you did see the share price you wouldn't really care about this aspect but essentially from 2022 they have been doing share BuyBacks something they are continuing to do over the next few quarters as we mentioned with that newly established program roic as always 10% or more or 12% for this industry give us Faith management are able to effectively allocate their Capital numbers looking very very good 6 61% in 2024 78 on a trading 12mth basis so no issues there and the margins well whilst it does look very very strong not only noting the consistency over longer term above the minimum levels but also the operating efficiency from 16 to 54 our question still maintains whether or not they can keep that high level we have seen over the last few quarters free cash flow margin also looking very good well above the minimum 5% 45 in 2024 this is a strong free cash flow machine finally the net debt to ebit DAR referring to the earning before the interest tax depreciation ammortization below 1.5 is what we want to see numbers below that you can see relate to the number of years it would take the company to pay off all of their debt net of cash on hand not even one day over the last 10 years not even one day over the next 12 months and remember this correlates to Dividend safety balance sheet strength so it does look very very good when we talk about those elements of the company now let's jump into our valuation model as always if you do enjoy the content value is being provided smash that like button hit that subscribe and Bell button so you are contined notified of these videos as they drop now our intending value of $140 still remains unchanged from previous episode and how we got to this value is we ran it through the DCF model we have the free cash flow year onye now over the last 5 years this has grown by 135% over the last 10 years 94% and as we saw just over the next year they're anticipating to grow more than 100% so what we've done is we've gone for a low medium and high rate 25 30 and 35 well we've ultimately gone for the 30% with the discount rate of 8% we got the present value of future free cash flows and terminal value add together with the cash subtract total debt get value divide by the shares outstanding and as you can see here the 140 which ultimately gives 20% upside now these numbers are very subjective you can always grab a copy of this model by clicking on the pin comment below putting in your own numbers whether it's for NVIDIA or any others and for those that believe that number is way too high well at a 25% more conservative level it does bring the intrinsic value to $100 which does give in fact downside of 14% for those that believe it should be higher at 35% well as we can see 1 192 giving essentially a 64% upside and in previous episodes we have run through Bloomberg who talk about this industry as a whole over the next 10 years increasing at 42% year- on-year and for those that do believe that is in fact more realistic they do believe this industry is going to continue to boom and we are moving into a complete New Era then we can see 296 which does ultimately give 153% upside however for today's episode we're going to take that Medium rate of 30% as we can see the 13979 intrinsic value and as always on this channel we do use an MOS 10% which we execute if it meets our three golden criteria wide Moe strong financial metrics good forward-looking data a buy 126 if you believe that then we keep going till it's near the current trading price and we can see in today's episode is not at the 20% level just yet it's does sit around 15% up to 119 but do remember when the market does open tomorrow we could see a lot of volatility it could continue to go down or it could recover and we do see Wall Street have updated their price forecast upwards in fact they now have the price at $150 over the next 12 months indicating 28% upside as always though do give us your thoughts in the comments below is this one based on the earnings you're looking to buy the dip maybe this is one you hold and going to continue to maintain your position or maybe you are considering selling after the earnings report as always though do give us your thoughts in the comments below if you enjoyed today's episode smash that like button hit that subscribe and Bell button don't forget to sign up to the free Weekly Newsletter below and as always come and join us in the patreon where we do run through our buys and sales as always have a great day and we'll see you all on the next one