NVIDIA, the high-flying chipmaker, is set to report its fourth-quarter results after the market closes on Wednesday. With expectations soaring, Deepwater Asset Management’s Gene Munster offered insights into what investors can anticipate from the company’s quarterly report.
NVIDIA’s projected earnings per share for the quarter are $4.56, while revenue is expected to reach $20.37 billion, according to analysts. These figures represent substantial growth compared to the previous year’s earnings per share of $0.88 and revenue of $6.05 billion.
Munster highlighted the stock’s impressive surge of approximately 200% over the past year, propelling NVIDIA to become the third-largest valued tech company. As investors eagerly await the company’s financial report, Munster believes the growth outlook for calendar year 2025 will be a pressure point that captures everyone’s attention.
However, Munster predicts that NVIDIA will surpass Wall Street’s projected 236% growth for the fourth quarter due to improvements in supply. The company has emphasized supply improvement during its third-quarter earnings call and expects this positive trend to continue throughout 2024. Munster believes this will contribute to revenue growth, despite concerns about the law of large numbers and challenges in sustaining growth. He also expects the company’s commentary on supply improvements to have a positive impact.
The Street currently anticipates 60% revenue growth for calendar year 2024. Munster considers this achievable and believes analysts will likely increase their expectations, despite challenges posed by China. While the China chip ban restricts the export of NVIDIA’s advanced chips to the country, Munster believes that in the larger context, the negative impact from China will be overshadowed by AI advancements.
Looking ahead to calendar year 2025, Wall Street forecasts a substantial drop in revenue growth to 16%. Munster attributes this decline to the law of large numbers and skepticism regarding the sustainability of NVIDIA’s growth. The declining growth rate is affecting the stock’s current trading multiple, leading investors to believe that growth will hit a wall in 2025.
Following the release of the fourth-quarter earnings, Munster expects upward revisions in earnings growth estimates, potentially raising the 2025 estimate from 20% to 25%. Compared to other companies, NVIDIA’s stock is currently trading at a higher multiple of earnings, which reflects investors’ perception that it is more of a boom-and-bust business rather than a stable one like other large-cap tech stocks.
Munster draws attention to NVIDIA’s growth drivers, as mentioned by CEO Jensen Huang, including the ongoing phase of AI involving tech giants and startups, the enterprise wave focusing on enterprise applications, and the Sovereign AI wave where countries build their own AI. He believes these drivers support the idea that NVIDIA can continue to grow higher for a longer duration.
In conclusion, investors eagerly await NVIDIA’s Q4 results, with expectations running high. Alongside exceeding Wall Street’s growth projections, the company’s commentary on supply improvements and the sustainability of growth will be closely watched.
