Nvidia Nvidia Nvidia We always need to talk about it these days. Because it is a stock that alone drags the American stock market. It had fallen sharply from Thursday to Friday, and I expressed my opinion that this decline was temporary. I attributed the reason to the closings in the American options market. I said that it would start to return from Monday - Tuesday this week, and the stock was in a hurry. The rise started again on Tuesday. Of course, memorizers made a big mistake again. Looking at Thursday and Friday, they tweeted things like the balloon collapse that will make history has begun and we will make a lot of money from it. The stock rose so quickly on Tuesday that they're probably busy eating those tweets right now. Memorizers who claim to guide investors have no idea about how the American stock market works and how to evaluate a fast-growing technology company. That's why they label every rapid rise they see as a bubble.
Yes, Nvidia has risen very quickly and I say it needs some fixes. But there is no bubble in front of us, on the contrary, I think there is a stock that can go much higher. But these are not my opinions, I do not want to share them with you. I will try to explain to you why Nvidia is technically not a bubble, and after what I have told you, you will see better what you need to look for before you immediately label something as a bubble and quickly shorten it and become miserable and disgraced in the market. In this context, let's take a look at what's going on at Nvidia. The company's turnover growth on a quarterly basis is truly incredible. In the first quarter of 2023, the turnover of this company was only 6 billion, now it is 26 billion in 3 months. So there is incredible growth. A company with average year-over-year growth of 65.82%. There is a 300% increase in turnover compared to the same period last year. If you look at the gross profit, similarly, it has a gross profit of 20 billion 406 million. We see a 384% gross profit increase compared to the same quarter last year. When we look at the net profit, there is a net profit of 14 billion 881 million in the last quarter. This means a growth of 526% compared to the same quarter last year. So this company is really growing. Why am I dwelling on this? Because the stock value of a company can increase in three ways. The first of these is thanks to the real growth of the company. In other words, the company's turnover is increasing and its profits are increasing. Nvidia's profitability and turnover increases are staggering. This will eventually be reflected in the company's valuation.
Americans call the second type of growth multiple expansion. In other words, there may be growth in the multiples of the company's basic valuation ratios, such as the price earnings ratio. So the company is not actually growing very fast, but the stock is growing very fast. This is why price divided by profit increases. So when can this happen? There are positive expectations about the company or the markets are generally in a risk-taking mood. There is serious manipulation of the stock, etc. The situation is not quite similar with Nvidia. Because the fundamentals are going fast, a third option is a combination of the two. So the company exhibits good fundamentals and the stock soars. Then, short-term traders enter what we call a momentum trailer, that is, if this stock is rising, let me enter and earn some money, and temporary bubbles may occur.
In my eyes, Nvidia was somewhere around that third place when it went to $140. So the fundamentals went up tremendously, but then some momentum trading came into play. The correction that spread over Thursday, Friday and Monday rebounded it. Now I think Nvidia has come to a more reasonable place. It's come to a reasonable place, considering what it is. Let's look at the valuation rates a little now, if you want. When it comes to valuation ratios, of course the first thing that comes to mind is always the price earnings ratio. We see that Nvidia's price earnings ratio is currently 73.65. So how is this compared to a year ago, there is only a 4.33% increase. Now, I don't know if you think Nvidia was a bubble a year ago, but Nvidia wasn't a bubble a year ago. But if you say that its value has increased by 200% since then and that it is now a bubble, then you are wrong.
Nvidia 246 is a balloon. For example, the company's price-earnings ratio has gone crazy, reaching up to 246. Then, it fell sharply after the FED raised interest rates in America. It currently appears at 73.65. If you draw a line through the history of the chart, you'll see that Nvidia is actually trending somewhere near its normal averages. Moreover, price divided by earnings is a historical number, so Nvidia's stock rose very quickly. But this is looking at the last year. However, in fact, Nvidia has been very excited in the last two quarters. Therefore, it is more useful to look at the future price divided by earnings ratios, rather than the past indicator of price divided by earnings, in these fast-growing stocks. Finchat.io is a good platform in this regard. I also use. Here we can find a table called forward valuation.
In other words, future valuation is Forward P/E, that is, the company's future price divided by its earnings. Of course, will he earn these earnings in the future? It is not possible to be sure of this, but the CEO of the company says, "Yes, we will achieve these profits and continue to grow." When we look at this, we see a price earnings ratio of 43.4 in the forward. So, is this too high or not too high? Nvidia has priced much higher than this before. For example, the forward price earnings ratio reached 83-84 at one point. We are far behind him. In fact, it is not cheap, but it is not extremely high, and we know that Nvidia exceeds expectations in every balance sheet period. In other words, it is possible that the expected earnings divided by price may be higher than expected for the future. In this case, this number will come down even further. If you pay attention, there has even been a sharp downward trend in the graph recently. Nvidia is not an expensive stock based on its track record.
Another way to find out if a company is overvalued is to compare it to its peers, i.e. Nvidia against other microchip companies. Here you can look at AMD, Broadcom (AVGO), Qualcomm and Intel as competitors. When we look at the last 12 months in Nvidia, the price divided by earnings ratio is 73.5, AMD 233, AVGO 69.5, Qualcomm a little cheaper 26.95, Intel 32.18. Now here, once again, Nvidia is not the most expensive, AMD seems to be more expensive. Broadcom seems to have caught it pretty well, too. Well, when we look at P/E GAAP divided by forward, that is, future price gain, Nvidia is 49.57, AMD is 110, Broadcom is 80, Intel is 222. Here, even Qualcomm 24.49 seems to be cheap. Nvidia is cheaper than all but Qualcomm.
We also have another ratio, which we call PEG GAAP. This takes into account the company's future growth. So when we look at price divided by earnings divided by growth, PEG GAAP forward is 1.42 for Nvidia, 1.05 for AMD, 1.96 for Broadcom, 1.76 for Qualcomm, 0.58 for Intel, so there is not such a high ratio. If you look back over the last 12 months, the cheapest is Nvidia's PEG ratio of 0.09, AMD's PEG ratio is 1.23. So Nvidia is not too expensive compared to competitors. So all this does not mean that Nvidia is cheap. These ratios are high in every way. But Nvidia still has a valuation somewhere reasonable based on its historical performance. Nvidia has a reasonable valuation compared to similar players in the industry.
So, in this case, what could pull Nvidia's price down? Of course, a general collapse in the stock markets could bring it down, this is always possible. More importantly, if there is a decline in Nvidia's performance. In other words, if the company can no longer grow, if the company's growth rate decreases, then Nvidia will retreat. But frankly, as Nvidia launches its new chips in the coming period, as you know, two new series chips are entering the market, and as the demand in artificial intelligence continues, I think the growth in Nvidia will also continue. In this case, I see no reason for share levels to go much lower. I repeat, but if there is a general collapse in the markets, of course Nvidia will also go down, or if there is a decline in Nvidia's own company performance, Nvidia's shares will also go down. Apart from that, of course, there may be corrections from time to time. But I believe Nvidia stock has more upside, and frankly I wouldn't be surprised if it hits $200 by the end of the year, which would mean $2000 in its old undivided form.
Please do a few fundamental analyzes before calling a stock a bubble. So just because something rises fast doesn't mean it's a bubble. Nvidia is one of the examples that we rarely see in history. There are very few examples where a company's valuation has increased so much in line with the company's actual performance. In the past, it has always been given as an example of Tesla, but for a while it rose like this and then it became a bubble and crashed. Because there was a valuation increase in Tesla far beyond the price gain. At one point, the price reached 1400 at its peak. There is no such situation with Nvidia. Yes, it's not cheap, but it may still have a ways to go. Please don't be a memorizer. Please be aware of the stocks' figures, numbers, statistics, industry encounters. It will make you a much, much better investor.
The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.
