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NVIDIA (NASDAQ: NVDA) stock has risen again recently. From a low of $102 on September 6, it has risen 18% to $121.
However, for long-term investors, those changes are mere rounding errors. Nvidia shares have increased in value more than 262 times since September 2014!
Here, I want to look at analyst growth forecasts through 2026 to determine whether I think the stock is attractively priced at $121.
Revenue Growth Estimates
Nvidia's fiscal year runs from February to January. Somewhat confusingly, this means that the current year is FY25 and the next one (FY26) will begin in February.
Last year (FY24), Nvidia's revenue soared 126% year-over-year to $60.9 billion. This gives the stock a very high price-to-sales (P/S) ratio of 31.3. That is above the S&P 500'Magnificent Seven' or any other average you want to check out.
However, Wall Street expects very strong revenue growth over the next three years. In fact, it forecasts that Nvidia's revenue will surpass $200 billion by FY27. That would be a truly impressive increase from the $27 billion reported in FY23.
If this forecast is accurate, we'll see a forward P/S multiple of 14.4 by then, all things being equal. This still seems a bit expensive to me, even if there is a chance that Nvidia will beat the estimates.
| Fiscal year | Revenue forecast | price/earnings ratio |
|---|---|---|
| FY25 | 126 billion dollars | 23.6 |
| FY26 | 177 billion dollars | 16.8 |
| FY27 | 207 billion dollars | 14.4 |
But what about earnings prospects?
Earnings Growth Estimates
Right now, Nvidia stock is trading with a price-to-earnings (P/E) ratio of 57.
But forward multiples start to fall significantly when we look at earnings per share (EPS) forecasts for the coming years. We could be looking at a P/E ratio of 25 for FY27.
| Fiscal year | EPS Forecast | Forward P/E Ratio |
|---|---|---|
| FY25 | $2.84 | 42.7 |
| FY26 | $4.07 | 29.8 |
| FY27 | $4.83 | 25.1 |
The problem here, of course, is that we simply don't know what demand for the company's graphics processing units (GPUs) will be like in 2026. There is a risk that it will be much lower than currently projected.
However, in the short term I am optimistic, especially given some of the recently published stories about demand for ai chips.
Billionaires have been 'begging'
In September, for example, Oracle Co-founder Larry Ellison revealed that he and Elon Musk invited Nvidia CEO Jensen Huang to dinner and basically “begged“Him to give them access to more GPUs.
“I would describe the dinner as if Oracle, Elon and I begged Jensen to give us GPUs.” Ellison recalled. “Please take our money. Please take our money. By the way, I already have dinner… We need you to take more of our money, please..”
This highlights how desperate all the tech giants are to get their hands on Nvidia's gold GPUs. They would rather risk huge overspending than be left behind in the ai revolution.
The billionaires have been selling
On the other hand, some of Wall Street's biggest names have recently dumped Nvidia stock. For example, hedge fund manager David Tepper reduced his stake by 84% in the second quarter.
He said Nvidia's earnings look great for 2024, and probably 2025, but absolutely “no idea”around 2026.”There are too many unknowns about how this (ai) could develop, and earnings swings are too large“Tepper added.
Given the uncertainty beyond this year, I have no plans to invest in Nvidia stock at $121.
