$$NVDA stock is skyrocketing …is the stock really getting cheaper?
Let's review the thesis:
Nvidia has been able to blow through the earnings estimates each quarter. As a result, analyst are revising their estimates
—For example, F26 EBITDA est. went from $86bn to $103bn after the report (20% thus far), and we haven’t even seen the benefit of some of the company’s recent initiatives.
Hence, if you look at the multiple (EV/EBITDA), it's still hovering around 25X, with the stock's upside being driven mostly by earnings surprises.
How is the company able to deliver such a massive earnings upside?
Key points that analysts missed are:
1.) Shortening the product innovation cycle to 1 year from 2 years. While there are now competing products for the H100, no one comes even close to the B100, which is currently in production and will have a BIG impact on F25 # (per the company) flowing through to next year.
2.) Networking—This is a huge market where Nvidia was able to scale from a few hundred million in revenues to $10bn+. The key trend that is happening here, which is still under the radar, is that Nvidia is able to embed software in the networking fabric, thus optimizing the usage of a GPU cluster. This will be a huge differentiator for the company.