A week ago, NVIDIA Corporation (NASDAQ:NVDA) came out with a strong set of first-quarter numbers that could potentially lead to a re-rate of the stock. Results were good overall, with revenues beating analyst predictions by 2.7% to hit US$3.1b. Statutory earnings per share (EPS) came in at US$1.47, some 7.2% above whatthe analysts had expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from NVIDIA's 35 analysts is for revenues of US$14.5b in 2021, which would reflect a substantial 23% increase on its sales over the past 12 months. Per-share earnings are expected to rise 7.6% to US$5.84. In the lead-up to this report, the analysts had been modelling revenues of US$13.6b and earnings per share (EPS) of US$6.44 in 2021. Overall it looks as though the analysts were a bit mixed on the latest results. Although there was a a substantial to revenue, the consensus also made a small dip in to its earnings per share forecasts.
The analysts also upgraded NVIDIA's price target 13% to US$374, implying that the higher sales are expected to generate enough value to offset the forecast decline in earnings. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic NVIDIA analyst has a price target of US$430 per share, while the most pessimistic values it at US$200. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.
Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. The analysts are definitely expecting NVIDIA's growth to accelerate, with the forecast 23% growth ranking favourably alongside historical growth of 19% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 9.1% next year. Factoring in the forecast acceleration in revenue, it's pretty clear that NVIDIA is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.
With that in mind, we wouldn't be too quick to come to a conclusion on NVIDIA. Long-term earnings power is much more important than next year's profits. We have forecasts for NVIDIA going out to 2025, and you can see them free on our platform here.
Before you take the next step you should know about the 2 warning signs for NVIDIA that we have uncovered.
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