NVIDIA NASDAQ: NVDA growth is slowing and margins are expected to decline, but so what? Over the past four years, the company’s business has grown by almost 800% and continues to grow. Growth will eventually peak, but business is expected to be strong thanks to the AI revolution.
NVIDIA’s first mover advantage and dominant position in the DC market positions it well to benefit from the ongoing technology innovation cycle it has initiated. Artificial intelligence technology will take giant steps in the next few years.
Data centers around the world are migrating to NVIDIA silicon infrastructure to meet demand from AI. Important details from its third-quarter results show that demand for Hopper, the current generation of AI, and Blackwell, the next generation, is “incredible.” The only thing that will hold this company back over the next two to four quarters is supply, which is rising.
NVIDIA unveils another stunning quarter
NVIDIA stock forecast today
US$160.23
Growth potential 11.98%Moderate purchase
Based on ratings from 44 analysts
| High forecast | US$200.00 |
|---|---|
| Average forecast | US$160.23 |
| Low forecast | $65.00 |
NVIDIA stock forecast details
NVIDIA’s third-quarter results may be its best performance in two years of sequential improvement. The company’s growth has slowed to just 95%, but that beats the 205% growth achieved in last year’s third quarter and is well above consensus estimates. The company’s results were quite impressive, 1,300 basis points above the MarketBeat consensus, but largely due to the upward revision trend.
Analysts raised their revenue and earnings forecasts ahead of the report, setting the bar very high. Strength lies in the DC business, which grew 112% year-on-year with revenue at 87%, but all segments grew. The core gaming segment grew 15%, Pro Visualization grew 7% and automotive grew 30%, demonstrating broad strength across the portfolio.
Margin news is also good. The company increased gross margin by another 60 basis points and operating profit grew 110%. Net income rose more than 50% and adjusted earnings rose 103%. The most important detail about cash flow and balance sheet is that positive cash flow is sustainable, which contributes to enviable improvements in the balance sheet.
The company’s cash balance increased about 50% year-over-year to $38 billion, leaving it with a net cash position relative to total liabilities rather than just very low debt. Share capital is also growing by about 50% year-on-year and is expected to continue to grow.
The takeaway from this data is that the company is well positioned to do whatever it wants, including significant returns for shareholders. The potential for aggressive share buybacks, special dividends, and dividend increases is growing each quarter. The buybacks in the third quarter were enough to offset the dilution and gradually reduce the number of shares.
The forecast is another factor in favor of rising stock prices. The company says demand for Blackwell is outpacing production, but production is rising, so investors can expect revenue to remain flat, if not higher, in 2025. Looking to the fourth quarter of fiscal 2024, the company expects another sequential increase in revenue, with revenue increasing approximately 70% year-over-year and profitability remaining strong.
Analysts lead the market to higher price levels
Analysts’ reaction to this news differs from the market’s initial reaction. Analysts have raised their price targets, showing growing confidence that NVIDIA shares will trade near $200 over the next twelve months. The move to $200 represents nearly 40% upside from the critical support target and would likely be viewed as a low target in hindsight. Trends driving analyst sentiment are still in place, suggesting that the trend of upgrades and analyst revisions will continue into the fourth quarter and fiscal year 2025.
NVIDIA stock price action slowed following the release of third-quarter data, but even so, it remained bullish for investors. The pullback is less than 5% and the critical resistance target, which was the previous all-time high, has not yet been broken. The likely scenario is that this market will retest support at the previous all-time high and re-confirm it, if not re-confirm support at a higher level, leading to new all-time highs this year. In this scenario, NVIDIA shares could reach $200 in the first half of 2025.
You should hear this before you consider NVIDIA.
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