A week ago, NVIDIA Corporation (NASDAQ:NVDA) came out with a strong set of third-quarter numbers that could potentially lead to a re-rate of the stock. NVIDIA beat earnings, with revenues hitting US$3.0b, ahead of expectations, and earnings per share outperforming analyst reckonings by a solid 16%. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for NVIDIA from 38 analysts is for revenues of US$12.9b in 2021, which is a huge 29% increase on its sales over the past 12 months. Earnings per share are expected to leap 47% to US$5.82. Yet prior to the latest earnings, analysts had been forecasting revenues of US$13.0b and earnings per share (EPS) of US$5.81 in 2021. So it's pretty clear that, although analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
The consensus price target rose 16% to US$225 despite there being no meaningful change to earnings estimates. It could be that analysts are reflecting the predictability of NVIDIA's earnings by assigning a price premium. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values NVIDIA at US$275 per share, while the most bearish prices it at US$140. 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.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the NVIDIA's past performance and to peers in the same market. Analysts are definitely expecting NVIDIA's growth to accelerate, with the forecast 29% growth ranking favourably alongside historical growth of 21% per annum over the past five years. Compare this with other companies in the same market, which are forecast to grow their revenue 7.1% next year. It seems obvious that, while the growth outlook is brighter than the recent past, analysts also expect NVIDIA to grow faster than the wider market.
The Bottom Line
The most obvious conclusion from these results is that there's been no major change in the business' prospects in recent times, with analysts holding earnings per share steady, in line with previous estimates. Fortunately, analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - and our data does suggest that NVIDIA's revenues are expected to grow faster than the wider market. Analysts also upgraded their price target, suggesting that analysts believe the intrinsic value of the business is likely to improve over time.
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 estimates - from multiple NVIDIA analysts - going out to 2023, and you can see them free on our platform here.
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