NVIDIA's 'Strong Performance + New Business'... There's a Reason Why Its Stock Is Expensive

[Asia Economy Reporter Ji-hwan Park] Korea Investment & Securities evaluated Nvidia on the 21st, stating that following strong third-quarter earnings, the company’s performance improvement trend is expected to continue.

This year’s third-quarter revenue reached $7.1 billion, a 50% increase compared to the same period last year. Earnings per share (EPS) were $1.17, up 60% year-over-year. Both figures exceeded consensus estimates by 4% and 5%, respectively. The gross profit margin (GPM) rose by 0.4 percentage points from the previous quarter due to improved product mix driven by strong sales of the RTX 30 series.

Won-sik Lee, a researcher at Korea Investment & Securities, commented, "The third-quarter results surpassed market expectations," adding, "All business divisions except the automotive sector recorded their highest-ever sales, indicating ongoing diversification of the product portfolio." Sales in all business sectors excluding the automotive division again set historical records this past quarter. In particular, Data Center sales exceeded market expectations by 4% due to increased demand from hyperscalers and enterprises.

The fourth-quarter revenue guidance, based on the midpoint, is $7.4 billion, which surpasses the consensus revenue estimate of $7.1 billion by 5%. The driving forces behind the fourth-quarter performance improvement are expected to be continued strong demand in the Data Center and gaming sectors. Lee emphasized, "The Data Center segment is gaining competitiveness due to a surge in machine learning computation demand driven by accelerated AI adoption by companies," and added, "In the gaming sector, inventory in the channel market remains significantly low, so inventory replenishment demand from the channel market is expected to continue into the second half."

Nvidia’s growth potential is also considered vast as it continuously secures new growth engines such as autonomous driving and the metaverse. The stock price has risen 124% since the beginning of the year, and although the current stock price reflects a price-to-earnings ratio (PER) of 70.5 times based on next year’s expected earnings, Nvidia is proving its valuation premium through its unparalleled growth rate. Researcher Lee stated, "We maintain a consistently positive view on Nvidia, which is showing earnings growth even steeper than the growth rate of its end industries."

This content was produced with the assistance of AI translation services.