Weekly Valuations: Nvidia (NASDAQ:NVDA)

Nvidia (NASDAQ:NVDA) shares hit an all-time high after the chip maker announced its third quarter earnings report on 17 November. Revenue rose 50% year-on-year to $7.1 billion, beating estimates by $290 million. Adjusted net income rose 62% to $2.97 billion, or $1.17 per share, beating expectations by six cents.

NVIDIA is currently trading at a P/E ratio of around 100x earnings.

Investors seem to be betting that the company will  benefit massively from the global #microchip shortage which is pushing up prices and could lead to sales growth doubling compared to  previous estimates. The fact that NVIDIA has consistently outperformed analysts’ estimates also likely contributes to the lofty valuation.

The company continues to excite investors with several new #developments. One very exciting one, announced at the recent GTC conference,is that the eighth version of the Hyperion platform for #autonomous driving is now available.

“DRIVE Hyperion 8” is a computer architecture and sensor set for full #self-driving systems.

Nvidia is thus relying on its proven strategy of positioning itself as a full-range supplier for autonomous driving and investors seem to be betting on that becoming a very profitable business segment.

Our DCF valuation is based on analyst forecasts  and these indicate that the company is currently highly overvalued.

Even with double digit average sales #growth expectations, our DCF analysis gives a value of US$ 519 billion,roughly 35% below the current market cap.

Comparing NVIDIA to how its peers are trading results in a valuation in the US$ 200 – 250 billion range, which also seems to imply that NVIDIA is massively #overvalued.