Nvidia is undervalued and poised for continued growth; analyst estimates are low and the stock trades at a discount to historical multiples, offering upside if growth persists.

This week, the largest company in the world, Nvidia, ticker symbol NVDA, reports earnings, making it one of the biggest events of the earnings season. It could end up shifting the entire market this week and in the months to come.

With Nvidia being the largest company in the world, it makes up a large percentage of the major indexes, even if you don't own the individual stock. As an example, it's 7.23% 23% of the S&P 500, the largest holding, and it's 12.5% of the NASDAQ 100, the largest holding.

So, this is an event that matters for the entire market, everyone invested in the US stock market, and especially for me. As many of you know, I have built up a large position in Nvidia over the last quarter.

I detailed my full thesis in a video last week where I discussed why I think Nvidia will be the first $10 trillion company. for context, it's currently at a $5 trillion market cap.

The growth of Nvidia's actual business has been historic over the past few years. They have beaten earnings every single quarter going back to early 2023. That's 14 straight EPS, and they have beat 19 of their last 20 revenue estimates.

In the most recent quarter, they beat their earnings per share number by 6.3%. That quarter came in at $187, up 130% year-over-year. And in the past 5 years, their quarterly earnings per share is up 1,458%. That's an 84% compound annual growth rate.

However, just because Nvidia keeps growing and beating their earnings, that does not mean that the stock always pops after reporting earnings. In fact, Nvidia has had four straight earnings beat and guidance raise quarters, and the stock price fell each time the following day.

The most recent one, the stock fell 0.8%, the one prior 3.25. 2 5.5 1.8 despite beating earnings per share expectations among analysts raising guidance and seeing historic earnings per share growth.

In fact, Nvidia stock hasn't had a post earnings pop in the stock price since May 2024.

When Nvidia stock falls, the whole market, especially the NASDAQ 100, falls with it. And that's because Nvidia is the top AI semiconductor name and it can move that entire trade, the entire supply chain.

So, is Nvidia going to go up or down after earnings? I think the answer to that question has to do more with market sentiment than the actual earnings results because it seems fairly obvious they're going to beat and raise guidance again, especially since we've already gotten the earnings reports from all the big tech companies putting out the large capex spend in the data center buildout.

But as Warren Buffett says, in the short run, the market is a voting machine. And the market has been voting in the past four quarters for Nvidia that they don't believe the growth will keep going.

Nvidia's stock price is only up 15% over the past year, while its trailing 12 months earnings per share is up 64% in that time. They earned $48 billion of free cash flow in the latest quarter.

The other part of that Warren Buffett quote is that in the long run, the market is a weighing machine. Over the long term, the market will weigh the intrinsic value of the company.

So, while Nvidia's stock price hasn't done much over the past year, it certainly is becoming a heavier and heavier business. The second most free cash flow generated in the entire stock market over the trailing 12 months, $119 billion. and the company is still growing quarter after quarter after quarter.

Nvidia will soon be generating the most cash of any company ever, but that doesn't mean it's going to pop on this earnings report.

In today's video, I'm going to give you my thoughts on this upcoming earnings week, the stocks I'll be watching and that I'll likely cover in detailed follow-up videos that includes an extended look at Nvidia and some beaten down software stocks that could be value plays companies like Inuit and Salesforce.

Some dividend growth stocks that have been slowing down and a semiconductor company that Nvidia CEO said a few months ago could be the next $1 trillion semiconductor company.

But then the big story of this earnings week is Wednesday after market closed. That's Nvidia, ticker symbol NVDA. Now, I dove into this a ton at the beginning of the video, but that's because it's the big story and it's also very interesting.

I also happen to own a stake. Full transparency. Do your own research. Don't just blindly follow me. And it's one of the most impressive stories in the history of capitalism, the growth of the data center buildout over the past 3 or so years.

You can see the expectation is $92.2 billion in this quarter for revenue and $29 of earnings per share. I would expect them to beat in both of those. And it's the growth of Nvidia, the actual growth of the fundamentals, which is the reason why the stock price has been up so much over the past 5 years. 838% price return.

That's a 56% compound annual growth rate. But as I mentioned earlier, the stock price is only up 15% over the past year despite the actual cash flow the company generating being up 65% year-over-year in that time.

Earnings per share up 83% year-over-year. And this is all still ramping up. They just had $ 48.5 billion of free cash flow in the latest quarter. As I went over in my full Nvidia video, Jensen just a few months ago, I forget what month it was, like May or something, they had a GTC conference and he was up there giving a speech and he said they had line of sight to $1 trillion of revenue over the next two years.

And if you've been following basically all the guidance they give, they end up beating. So, they're kind of conservative with the guidance they give out. Now, that wasn't specific financial quarter guidance, but he did say it on stage in front of everyone.

Over the trailing 12 months, the company's generated $253 billion of revenue, $81 billion in the latest quarter. That's up 85% year-over-year. And that was the first quarter in the time of where he said they would do $1 trillion of revenue.

So what does that mean? It means they're going to be getting to an average of $125 billion a quarter over those eight quarters. Not going to get there this quarter, not going to get there next quarter.

So that means they're going to be well above that on the back end. Right now, analysts are expecting $394 billion in fiscal year 2027 and $570 billion in fiscal year 2028. Add those up, you're a little below a trillion.

So, right now, I would say analyst estimates for revenue are a little low compared to what's likely going to happen. All of the demand signals are still super strong in the

That's Nvidia, ticker symbol NVDA. Now, I dove into this a ton at the beginning of the video, but that's because it's the big story and it's also very interesting. I also happen to own a stake.

Full transparency. Do your own research. Don't just blindly follow me. And it's one of the most impressive stories in the history of capitalism, the growth of the data center buildout over the past 3 or so years.

You can see the expectation is $92.2 billion in this quarter for revenue and $29 of earnings per share. I would expect them to beat in both of those. And it's the growth of Nvidia, the actual growth of the fundamentals, which is the reason why the stock price has been up so much over the past 5 years. 838% price return.

That's a 56% compound annual growth rate. But as I mentioned earlier, the stock price is only up 15% over the past year despite the actual cash flow the company generating being up 65% year-over-year in that time.

Earnings per share up 83% year-over-year. And this is all still ramping up. They just had $ 48.5 billion of free cash flow in the latest quarter. As I went over in my full Nvidia video, Jensen just a few months ago, I forget what month it was, like May or something, they had a GTC conference and he was up there giving a speech and he said they had line of sight to $1 trillion of revenue over the next two years.

And if you've been following basically all the guidance they give, they end up beating. So, they're kind of conservative with the guidance they give out. Now, that wasn't specific financial quarter guidance, but he did say it on stage in front of everyone.

Over the trailing 12 months, the company's generated $253 billion of revenue, $81 billion in the latest quarter. That's up 85% year-over-year. And that was the first quarter in the time of where he said they would do $1 trillion of revenue.

So what does that mean? It means they're going to be getting to an average of $125 billion a quarter over those eight quarters. Not going to get there this quarter, not going to get there next quarter.

So that means they're going to be well above that on the back end. Right now, analysts are expecting $394 billion in fiscal year 2027 and $570 billion in fiscal year 2028. Add those up, you're a little below a trillion.

So, right now, I would say analyst estimates for revenue are a little low compared to what's likely going to happen. All of the demand signals are still super strong in the data center buildout.

You had basically all the hyperscalers raising capex. They're starting to see operating cash flow growth. Their stock prices finally went up. they were being punished for the capex increases.

Now Amazon and Microsoft, they finally got a little bit of a pop from it. The cloud growth is really good. And on the actual demand side of AI usage and AI inference and token generation, it's all just exploding.

I went over this a lot in my Nvidia analysis, but I'm just doing some back of the napkin math here for you guys. So latest quarter, they did $81.6 billion. That was $48.5 billion of free cash flow.

So, if they're going to do a trillion dollars of revenue over the next two years, that means they're going to have roughly $500 billion of free cash flow generated in that time.

That will be the most amount of free cash flow ever generated over a 2-year span. That will give Nvidia one of the best balance sheets in the history of corporations, funded by amazing cash flow.

And Nvidia is not a capexheavy company themselves. They get the chips manufactured by TSMC. Super optimized for free cash flow generation. The fab semiconductor model. It's a beautiful free cash flow business model.

They have started building some data centers themselves though to train open models which I think is a good thing because it just helps spur demand in general. But if we look at Nvidia over the trailing 12 months, they've spent $47 billion in share buybacks.

I would expect their return to shareholders to go up massively as they continue to generate more and more cash. Again, my quote at the beginning, short-term, the market's a voting machine.

In the long run, it's a weighing machine. Nvidia is becoming a heavy business and their capacity to reward shareholders and their intrinsic value of the company is growing. And that's why they just raised their dividend payment, which they rarely do.

They raised it by 2,400%. And now it actually has a reasonable yield of 0.48%. All the signs for Nvidia are that growth is set to continue at least for the next year or two. People will have tons of debate of what year three, four, five, and even 10 years from now is going to look like on the demand side for Nvidia.

We don't have enough time to go into all that in this video. Right now, I would say the consensus in the market with how things are being valued is that Nvidia, we're close to the peak and there's not going to be a lot of growth from here.

That's why the stock price hasn't gone up much in the past year. It's also why it's trading at a very reasonable valuation. The PE over the trailing 12 months is 31.9. The P forward-looking is 23.12.

So if we look at the forward-looking P ratio over the past five years, this is actually historically low for Nvidia. The median is 38.27. So we're in the 15th percentile right now.

And let's just say we base it on the trailing 12 months P ratio. The current is 35.7 for adjusted earnings per share. The median over the past 5 years is 53.7. So if we assume that as being the fair value for Nvidia stock, the median multiple, Nvidia is currently trading 34% below that median.

If we do it based on forward-looking earnings per share, so next year's earnings, the median has been 38.27 over the past 5 years for Nvidia. This implies an even larger discount for Nvidia stock.

And if the company got rerated back up to that 38 multiple, that'd be 65% upside from here. But the thing you have to remember is that Nvidia is growing very fast still. It's just unclear how much longer it can continue growing.

And frankly, I was wrong about this initially. I didn't think Nvidia could even get to where it is here. I was not aware of how big the market could be. And I think that's still might be the fact that people are being early in calling AI bubble.

We still have many, many years of growth ahead there. I'm not saying there can't be an overbuild in like 2030 or at some point in the future, but it's not the current conditions on the ground.

And I think people struggle to think in exponentials. We're talking about very high growth rates right here for Nvidia. The current analyst expectation is 92% growth year-over-year in fiscal 2027.

And then they're expecting that to go down to 42 and then 20. But really, the 3, four, and 5 year completely changes all the time. People have no idea what to think in those later years.

And given the multiple Nvidia is trading at, which is cheaper than like Coca-Cola and Proctor and Gamble on a forward-looking basis, when its actual fundamentals are growing 80% and the stock price is only up 15% over the past year, I don't think the market is pricing in the scenario where Nvidia grows 80% year-over-year again and then it does that the next year and potentially does that the next year.

If that happens or even if it goes 80%, 60%, 50%. That's a ton of growth and Nvidia would look very cheap today based on that. And then the question is, is the company done growing after that?

I'll let you decide that one. So, this is definitely the most interesting earnings report to cover during the week. It will definitely impact a lot of the broader market in the coming months because it has to do with the entire tech and AI trade, which is a large part of the overall market.

So, I look forward to reading through the earnings report and listening to the earnings call and I'll be back with a video to analyze that. So, if you want my thoughts post earnings, subscribe to the channel and I'll be giving you an update on that.

And it's the growth of Nvidia, the actual growth of the fundamentals, which is the reason why the stock price has been up so much over the past 5 years. 838% price return. That's a 56% compound annual growth rate.

But as I mentioned earlier, the stock price is only up 15% over the past year despite the actual cash flow the company generating being up 65% year-over-year in that time. Earnings per share up 83% year-over-year.

And this is all still ramping up. They just had $ 48.5 billion of free cash flow in the latest quarter.

As I went over in my full Nvidia video, Jensen just a few months ago, I forget what month it was, like May or something, they had a GTC conference and he was up there giving a speech and he said they had line of sight to $1 trillion of revenue over the next two years.

And if you've been following basically all the guidance they give, they end up beating. So, they're kind of conservative with the guidance they give out. Over the trailing 12 months, the company's generated $253 billion of revenue, $81 billion in the latest quarter. That's up 85% year-over-year.

And that was the first quarter in the time of where he said they would do $1 trillion of revenue. So what does that mean? It means they're going to be getting to an average of $125 billion a quarter over those eight quarters.

Not going to get there this quarter, not going to get there next quarter. So that means they're going to be well above that on the back end.

Right now, analysts are expecting $394 billion in fiscal year 2027 and $570 billion in fiscal year 2028. Add those up, you're a little below a trillion. So, right now, I would say analyst estimates for revenue are a little low compared to what's likely going to happen.

All of the demand signals are still super strong in the data center buildout. You had basically all the hyperscalers raising capex. They're starting to see operating cash flow growth.

Their stock prices finally went up. they were being punished for the capex increases. Now Amazon and Microsoft, they finally got a little bit of a pop from it. The cloud growth is really good.

And on the actual demand side of AI usage and AI inference and token generation, it's all just exploding.

I went over this a lot in my Nvidia analysis, but I'm just doing some back of the napkin math here for you guys. So latest quarter, they did $81.6 billion. That was $48.5 billion of free cash flow.

So, if they're going to do a trillion dollars of revenue over the next two years, that means they're going to have roughly $500 billion of free cash flow generated in that time.

That will be the most amount of free cash flow ever generated over a 2-year span. That will give Nvidia one of the best balance sheets in the history of corporations, funded by amazing cash flow.

And Nvidia is not a capexheavy company themselves. They get the chips manufactured by TSMC. Super optimized for free cash flow generation. The fab semiconductor model. It's a beautiful free cash flow business model.

They have started building some data centers themselves though to train open models which I think is a good thing because it just helps spur demand in general. But if we look at Nvidia over the trailing 12 months, they've spent $47 billion in share buybacks.

I would expect their return to shareholders to go up massively as they continue to generate more and more cash.

Again, my quote at the beginning, short-term, the market's a voting machine. In the long run, it's a weighing machine. Nvidia is becoming a heavy business and their capacity to reward shareholders and their intrinsic value of the company is growing.

And that's why they just raised their dividend payment, which they rarely do. They raised it by 2,400%. And now it actually has a reasonable yield of 0.48%.

All the signs for Nvidia are that growth is set to continue at least for the next year or two. People will have tons of debate of what year three, four, five, and even 10 years from now is going to look like on the demand side for Nvidia.

Right now, I would say the consensus in the market with how things are being valued is that Nvidia, we're close to the peak and there's not going to be a lot of growth from here.

That's why the stock price hasn't gone up much in the past year. It's also why it's trading at a very reasonable valuation.

The PE over the trailing 12 months is 31.9. The P forward-looking is 23.12. So if we look at the forward-looking P ratio over the past five years, this is actually historically low for Nvidia.

The median is 38.27. So we're in the 15th percentile right now. And let's just say we base it on the trailing 12 months P ratio. The current is 35.7 for adjusted earnings per share.

The median over the past 5 years is 53.7. So if we assume that as being the fair value for Nvidia stock, the median multiple, Nvidia is currently trading 34% below that median.

If we do it based on forward-looking earnings per share, so next year's earnings, the median has been 38.27 over the past 5 years for Nvidia. This implies an even larger discount for Nvidia stock.

And if the company got rerated back up to that 38 multiple, that'd be 65% upside from here.

But the thing you have to remember is that Nvidia is growing very fast still. It's just unclear how much longer it can continue growing. And frankly, I was wrong about this initially.

I didn't think Nvidia could even get to where it is here. I was not aware of how big the market could be. And I think that's still might be the fact that people are being early in calling AI bubble.

We still have many, many years of growth ahead there. I'm not saying there can't be an overbuild in like 2030 or at some point in the future, but it's not the current conditions on the ground.

And I think people struggle to think in exponentials. We're talking about very high growth rates right here for Nvidia. The current analyst expectation is 92% growth year-over-year in fiscal 2027.

And then they're expecting that to go down to 42 and then 20. But really, the 3, four, and 5 year completely changes all the time. People have no idea what to think in those later years.

And given the multiple Nvidia is trading at, which is cheaper than like Coca-Cola and Proctor and Gamble on a forward-looking basis, when its actual fundamentals are growing 80% and the stock price is only up 15% over the past year, I don't think the market is pricing in the scenario where Nvidia grows 80% year-over-year again and then it does that the next year and potentially does that the next year.

If that happens or even if it goes 80%, 60%, 50%. That's a ton of growth and Nvidia would look very cheap today based on that. And then the question is, is the company done growing after that? I'll let you decide that one.

So, this is definitely the most interesting earnings report to cover during the week. It will definitely impact a lot of the broader market in the coming months because it has to do with the entire tech and AI trade, which is a large part of the overall market.