Nvidia: Strong Market Growth Enables It For 15% Annual Returns

Summary:

  • Nvidia Corporation’s stock price has increased by 61.75% since my previous article, where the stock was rated as a buy.
  • After evaluating Nvidia using two valuation models, the stock is no longer considered undervalued, however, the potential downside is an insignificant 1.91%.
  • The average result gathered from both valuation models are a fair of $690.86 and a future price for 2029 of $1348.76.
  • Since the potential downside is insignificant, I am maintaining my buy rating on Nvidia Corporation stock.

TAIWAN-TECHNOLOGY-FOXCONN-NVIDIA

I-HWA CHENG/AFP via Getty Images

Thesis

In my previous article, I assigned a fair price for NVIDIA Corporation (NASDAQ:NVDA) at $548.29 (which at the time reflected a 29.54% upside), and a future price of $1658.85. Since then, my estimates on fair price have

TABLE OF ASSUMPTIONS
(Current data)
Assumptions Part 1
Equity Value 33,265.00
Debt Value 11,027.00
Cost of Debt 2.34%
Tax Rate 10.05%
10y Treasury 4.16%
Beta 1.72
Market Return 10.50%
Cost of Equity 15.06%
Assumptions Part 2
CapEx 1,324.00
Capex Margin 2.95%
Net Income 18,889.00
Interest 258.00
Tax 2,111.00
D&A 895.00
EBITDA 22,153.00
D&A Margin 1.99%
Interest Expense Margin 0.57%
Revenue 44,870.0

Revenue Net Income Plus Taxes Plus D&A Plus Interest Net Income Margin
2024 $58,930.0 $30,356.46 $33,408.01 $34,583.45 $34,922.30 51.51%
2025 $92,140.0 $51,046.20 $56,177.56 $57,353.01 $57,691.85 55.40%
2026 $111,020.0 $62,069.22 $68,308.65 $70,523.12 $71,161.48 55.91%
2027 $120,130.0 $66,236.76 $72,895.13 $75,291.31 $75,982.05 55.14%
2028 $155,610.0 $77,481.72 $85,270.48 $88,374.35 $89,269.10 49.79%
2029 $179,800.0 $84,287.88 $92,760.82 $96,347.20 $97,381.04 46.88%
^Final EBITA^

GeForce NOW Sale of GPUs for Gaming
FY 2024 2,017.26 10,258.45
FY 2025 2,906.67 13,725.80
FY 2026 4,188.22 18,365.12
FY 2027 6,034.81 24,572.53
FY 2028 8,695.55 32,878.05
FY 2029 12,529.42 43,990.83

Data Center Gaming Professional Visualization Automotive OEM & Other Total
FY 2024 43,635.00 12,275.71 1,290.00 1,061.00 289.00 58,550.71
FY 2025 55,198.28 16,632.47 1,431.26 1,453.57 386.68 75,102.25
FY 2026 69,825.82 22,553.34 1,587.98 1,991.39 517.38 96,475.91
FY 2027 88,329.66 30,607.34 1,761.86 2,728.21 692.26 124,119.32
FY 2028 103,610.69 41,573.60 1,954.78 3,737.64 926.24 151,802.96
FY 2029 121,535.34 56,520.25 2,168.83 5,120.57 1,239.31 186,584.30

Revenue Net Income Plus Taxes Plus D&A Plus Interest
FY 2024 $58,550.7 $30,159.47 $33,191.21 $34,359.10 $34,695.76
FY 2025 $75,102.3 $41,606.65 $45,789.11 $46,956.99 $47,293.65
FY 2026 $96,475.9 $53,939.68 $59,361.90 $61,286.26 $61,840.99
FY 2027 $124,119.3 $68,439.39 $75,319.18 $77,794.93 $78,508.61
FY 2028 $151,803.0 $75,582.69 $83,180.55 $86,208.49 $87,081.35
FY 2029 $186,584.3 $87,470.72 $96,263.61 $99,985.32 $101,058.17
^Final EBITA^


Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in NVDA over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.


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