NVDA is a growth stock, and the stock is priced in for their expectation to grow earnings by 47% this year - a bit overvalued considering the earnings growth rate of 39% of the past 3 years and estimated earnings for the next 2 years. They have been exceeding estimates for many quarters in a row, and that fuels overvaluation. However, the market will question its high multiple when earnings slow down or if they disappoint in a future quarter. Earnings are estimated to slow down for FY19 to 16% growth - although it's a good number, it's much smaller than previous growth rate, and the market might question if the current P/E of 50 is justified if earnings is growing 16% that year. I see NVDA as a great company that can turn into a not-so-great investment if you pay too much for it. Hence I'm on it for the short term.dpacto wrote: ↑Jan 12th, 2018 6:39 pmWhat do you guys think of NVIDIA? it reached $225 today and its basically ATH but I'm considering this stock even at this price I feel it could go over $1000 if this whole cryptocurrency, self driving car thing blows up in the next 5 years. Company looks stable too. I feel like worse comes to worse it just doesn't move that much but I don't see it dropping down...
Growth stocks are handled differently in my opinion, you can't treat them like traditional mature companies. There are lots of growth opportunities for stocks trading on Nasdaq exchange, but it's a different dynamic than your typical dividend growth company, specially when it's overvalued. Hence, for growth stocks, I prefer a set of mechanical criteria that deals with fundamentals (more on the sales, revenue and cash flow side, less on earnings) and on technical analysis, to have a controlled exposure of overvaluation, but this enters on other territories tailored to short term investing / swing trading. That's how I'm exposed on the Nasdaq world, as I find that the market doesn't price those companies through the traditional financial methods. BTW, NVDA is one of my holdings on my Nasdaq model, and that's my exposure to them.
So I'd say that it's a great opportunity for the short term and maybe medium term (provided fiscal momentum continues), since they keep exceeding estimates and they check all the financial quality criteria, but given its overvaluation, I wouldn't say that it's a good long term / set-and-forget holding. I will sell them when momentum stops, and might consider a long term partnership once valuation is more attractive.