NVIDIA beat earnings expectations, but the stock still slipped. Shares fell 1.8% on Thursday after the report, then bounced back 0.8% in premarket trading Friday. For investors wondering about this muted response, the explanation is pretty straightforward. The stock is now cheaper than before the results, and most of Wall Street remains bullish. Here’s how the valuation looks now.
NVIDIA now trades at a forward price-to-earnings ratio just above 22, down from about 26 before the earnings report. This is a big discount compared to its peers. Intel trades at more than 95 times forward earnings, and Advanced Micro Devices is at nearly 47 times. It is unusual for the leading AI chip company to have the lowest multiple among major chipmakers.
Analysts were almost all positive about the results. About 93% of those covering the stock have a Buy rating or something similar. The average price target is now around $294. Benchmark Research raised its target to $335 from $250 and kept its Buy rating. They say investors are so used to Nvidia beating expectations that it no longer leads to a big change in the stock price.
If the market keeps seeing Nvidia’s strong results as business as usual, the gap in valuation with its peers could keep growing until something happens to change investors’ minds.
