https://www.morningstar.com/stocks/this-onetime-market-darling-is-now-surprisingly-undervalued
This Onetime Market Darling Is Now Surprisingly Undervalued
This AI leader qualifies as a GARP stock today.
Key Morningstar Metrics for Nvidia
Fair Value Estimate
: $280
Star Rating
: 4 Stars
Economic Moat Rating
: Wide
Uncertainty Rating
: Very High
Nvidia reports earnings Aug 26. They are expected to be up 30% yoy. Forward PE is down to 19 vs 22 for the typical S&P stock. When reported investors usually sell. So PE falls by 30% or more.
Clearly investors think the glory days of rising earnings are over for AI.
Personally I think they are wrong. Tech stocks are innovative and likely to continue to grow earnings. Some AI companies will continue to do well. Much depends on continuing to grow earnings.
To me dips in AI stocks is a buying opportunity. But you have to pick the right ones.
Here’s the NVDA 16yr CAGR chart:
NVDA’s the only AI stock, that I follow, that’s on its mean CAGR.
ralph
You don’t follow Tesla? It’s an AI stock.
Or some say it is.
Is TSLA riding its mean CAGR?
ralph. Edited my previous post to add CAGR to the last comment.
Edit to add the TSLA 16yr CAGR chart.
Now, that’s interesting.
Is TSLA a back up the truck buy?
Doesn’t it have to go under the bottom CAGR line (-2RMS) to be a back up the truck buy?
Why would you buy Tesla?
What’s the bull thesis?
They have normal auto manufacturer sales and margins.
SpaceX makes contact with aliens and alien venture capitalists make a big investment in Musk-related companies.
intercst
Sounds as plausible as the other ideas.
Isn’t Spacex planning to buy Tesla? Will Tesla owners get a nice premium? Spacex stock?
Buying opportunity?
Spacex hit $112 yesterday. Is that a buying opportunity? How low will it go?
They report earnings tonight. They are leasing their unused compute (I guess “compute” is a noun now), for big, big bucks. Might be a good report. I’m not buying, mind you.
I’m not a fan of the BMW method for a number of reasons, one is that is misses value traps. Companies with good long term rates of growth can and do experience structural declines. Kodak is a famous example.
Tesla might be another. At one time, Tesla was experiencing rapid growth, dominated its market segment, and made eye-popping margins.
That’s not the story anymore. Sales have been flat for two years, profits are way down, and margins have been compressed down to legacy auto manufacturer levels.
In the meantime, it has a PE of 305 and a PEG of 10(!). It is priced as if it is a high growth company, but it isn’t a high growth company.
The bull case is that Optimus and Cybercabs will save it. Maybe they will, but you are paying a lot for those future earnings.
Same.
I look at CAGR for the SPY n QQQ. Sometimes the Russel2000.
Just to evaluate where the overall market is.
Looking at the index CAGRs, I don’t see the “OMG the market is in a bubble” … FUD.
YMMV 
For individual stocks, the fundamentals are way more important.
I’ve a full TSLA position, and am not looking to increase it.
In the CAGR graph, TSLA was slightly below the -1RMS. Ie, outside the top of the bell curve.
If I’d been in a TSLA accumulation phase, I’d have considered buying a tranche.
This, and Elon’s chimeric nature give me pause on buying more TSLA.
ralph
Au contraire says Michael Blurry:
Place your bets gentlemen.
Earnings due end of August. Could be a great buying opportunity. Forward PE of 19 shows clearly not over valued. But investors worry about end of AI spending.
Share price is trending upward due to strong earnings from other AI players.
Strong earnings expected. Will they disappoint? Doubtful. Will investors sell and drive down PE by 30%. We shall see. A limit order below market could fill.
