Even the most generous measurement of earnings, therefore, would require Nvidia to achieve and maintain 32% long-term earnings growth to maintain a PEG ratio of 1.0 - and 32% long-term growth could be problematic. (Valued on trailing earnings, the stock has an even higher P/E of 48). This could prove a problem for Nvidia stock, which sells for “a meaningful premium to everything else.”īy Moore’s calculation, Nvidia stock sells for 38 times current year earnings and 32 times forecasts for earnings in 2023. Nvidia continues to grow both sales and earnings for now, but even so, “earnings growth will likely be partially offset by multiple compression,” especially as inflation and interest rates rise and investors become less willing to pay large price tags for earnings far in the future. Near term gaming numbers look “solid,” says Moore, and over the long term as well, the analyst says he’s bullish on Nvidia’s “prospects and market positioning.” However, he does predict a deceleration in gaming revenues “that should result in a modestly challenging 2023” - helped only partially by Nvidia’s strength in selling server chips to data centers. Moore notes that Nvidia has built “a strong, differentiated cloud business and leading position in gaming.” That being said, the gaming business does pose some concerns. “Nvidia,” writes Morgan Stanley analyst Joseph Moore, “remains one of the best growth names in the semis space is a core holding.” For this reason, the analyst says Morgan Stanley’s approach will be “to at least maintain a market weighting in the stock, and look for spots for an overweight.” In other words, Moore appears to be saying here that under no circumstances would Morgan Stanley consider rating Nvidia a Sell. Perhaps in preparation for that big event, investment bank Morgan Stanley announced it is resuming coverage of the semiconductors giant - and provided a few thoughts on the company ahead of earnings. In just a little over three weeks, Nvidia ( NVDA) is due to report its Q1 2022 earnings.
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