In addition to a generally negative macro outlook, Nvidia (NVDA) has had enough of its own issues which drive its current 24 forward P/E near a two-year low. While its archenemy Advanced Micro Devices (AMD) maintains its recent stock performance leadership, bear camp argues that Nvidia has become a “fallen angel” that its stock will be dead money (Figure 1). Since all the information already out for a while, the question becomes if Nvidia’s stock price has properly reflected the recent mostly negative information. Thus, it may be time to look forward and revisit the fair valuation of Nvidia’s stock. This is what I set out to do in this post.
While Nvidia's fiscal 1Q results largely met and the 2Q guidance was in-line, the soft data-center outlook drives a full-year guidance of a small sales decline. The market remains concerned about a China slowdown, beyond tariffs and Huawei’s ban, but more on the weak gaming chip sales. With the company retracting the previous modest sales decline in fiscal 2020 (-6%), Nvidia’s stock has lost around 15% since 1Q earnings announcement.