The stock price is at a historical high. Can Nvidia break the record after joining the Metaverse?

Huang Renxun, the founder and CEO of Nvidia, predicts that Meta Universe will bring more than $40 billion in annual revenue to Nvidia.

Meta Universe is one of the hottest concepts in the science and technology circle in 2021, and global technology giants have announced the addition of Meta Universe. GPU giant Nvidia is no exception, even in the upper reaches of the meta-universe-Nvidia is building the infrastructure of the “meta-universe” technology, and has launched the OmniverseEnterprise software system for the development of meta-universe virtual world characters. Huang Renxun, the founder and CEO of Nvidia, predicts that Meta Universe will bring Nvidia more than $40 billion in annual revenue.

From then on, GPU giant Nvidia is going to become the leader of meta-universe infrastructure.

Nvidia, which is on the top of the market, announced its third quarterly report after the market on Wednesday, with revenue data and fourth-quarter guidance both exceeding expectations. Under the stimulus of the “double gun”, its after-hours stock price soared 5.17%.

The stock price is at a historical high. Can Nvidia break the record after joining the Metaverse?

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The growth rate of the gaming business has slowed, and the data center has become the biggest driver of NVIDIA’s performance exceeding expectations

On the whole, in the second quarter report, the management estimated that the third quarter revenue was 6.8 billion U.S. dollars, a fluctuation of 2%. Bloomberg analysts unanimously expected 6.98 billion, but the actual revenue reached 7.1 billion, which exceeded expectations.

The stock price is at a historical high. Can Nvidia break the record after joining the Metaverse?

It is not surprising that Nvidia’s third-quarter results exceeded expectations. As early as October 26, the third quarter report of old rival AMD stated that its data center business had doubled year-on-year, exceeding market expectations. At that time, the market predicted that Nvidia’s data center business would also bring surprises.

Sure enough, Nvidia’s data center business achieved $2.936 billion in revenue in the third quarter, a year-on-year growth rate of 54.5%, exceeding the 35% year-on-year growth rate in the second quarter. Data center is Nvidia’s second largest source of revenue, accounting for 41% of its revenue in the third quarter. It is a pivotal position and is destined to drive Nvidia’s overall revenue in the third quarter to exceed expectations.

The stock price is at a historical high. Can Nvidia break the record after joining the Metaverse?

Nvidia’s other main business game sector is relatively flat, with revenue of US$3.22 billion in the third quarter, a year-on-year growth rate of 41.8%, showing a quarterly slowdown.

The stock price is at a historical high. Can Nvidia break the record after joining the Metaverse?

Nvidia’s other business revenue is relatively small. It is worth noting that professional visualization business revenue is US$577 million, a year-on-year increase of 144%. Compared with the previous year’s single-quarter revenue of 300 million, this business has begun to usher in the second quarter of this year. break out.

The automotive chip business’s revenue this quarter was US$135 million, an 11% drop from the previous quarter, mainly due to supply chain shortages.

OEM and other business revenue was 234 million U.S. dollars, a year-on-year increase of 21%, mainly contributed by mining chips, but it fell by 43% from the previous month.

The stock price is at a historical high. Can Nvidia break the record after joining the Metaverse?

In terms of profitability, gross profit margin was 65.2%, net profit margin was 34.%, and net profit reached US$2.46 billion in the third quarter.

The stock price is at a historical high. Can Nvidia break the record after joining the Metaverse?

Look NVIDIA three quarterly from the data, no doubt finished beauty .

Revenue growth is expected to slow down next year. How can Nvidia support its high valuation?

Looking forward to the next quarter, Nvidia expects revenue to be US$7.4 billion, a 2% fluctuation, and a gross profit margin of 65.3%, basically the same as the third quarter.

The financial data is impeccable, and the future prospects are also very good.

Regarding game graphics cards, it is not ruled out that a large number of graphics cards are used for mining. Bitcoin prices have historically fluctuated sharply. If they can maintain a high level, it will have little impact on demand. However, if there is a bear market for several years, the game business may be affected. The management also admitted in the third quarterly report that it is not clear how many game graphics cards are used for mining.

The stock price is at a historical high. Can Nvidia break the record after joining the Metaverse?

However, the volatility of data center business is relatively mild. From historical data, it has basically maintained growth, with few declines. Even if it falls, the magnitude will be much smaller than the fluctuation of game business. The demand for Internet data will only increase in the future. The business is expected to become NVIDIA’s basic market.

The professional visualization business ushered in an explosion this year. Although the revenue of automotive chips has not yet been increased, most smart cars currently use NVIDIA chips. Therefore, it is not ruled out that with the explosion of smart car sales, it will gradually become a new growth pole. .

All in all, as the infrastructure of the future world, Nvidia does not need to worry about the prospects. There is only one worth discussing, that is, whether Nvidia is expensive at the current 78 times PE valuation.

According to Nvidia’s revenue of $7.4 billion in the fourth quarter, assuming a net interest rate of 35%, Nvidia’s net profit for the 2022 fiscal year is expected to reach 9.34 billion.

Taking into account the performance of NVIDIA always exceed expectations, so full-year net profit by 9.4 billion US computing elements , the current price of the corresponding PE valuation of 78 times.

The 78 times valuation corresponds to a 60% annual revenue growth rate, which does not seem to be excessive. But what is worth discussing is whether Nvidia’s revenue growth rate can maintain high growth in 2022?

From the perspective of quarterly revenue growth, revenue in the first quarter increased by 84% year-on-year, 68% in the second quarter, and 50% in the third quarter. The fourth quarter may be the same as the third quarter, showing an overall slowdown.

Looking to 2022, faced with Nvidia 2021 base year high number of video sound, maintaining revenue growth of 50%, the absolute Guards, considering the game more obvious signs of business slowdown, Nvidia 2022 revenue slowdown is big Probability event.

At present, Bloomberg analysts’ growth rate for 2022 is expected to be 15%, and it is bound to increase after the third quarterly report, but compared with the 60% growth rate in 2021 (corresponding to the 2022 fiscal year), it is much inferior.

Even if calculated on the basis of 30% growth in 2022, NVIDIA’s dynamic valuation is as high as 60 times, far exceeding the historical valuation range.

The stock price is at a historical high. Can Nvidia break the record after joining the Metaverse?

Without the high-growth halo, the PE valuation of 60 times will inevitably be a lot more eye-catching.

However, before the inflection point of the economy, valuation is not a constraint to the rise of stock prices. This is also reflected in other high-prosperity track stocks such as Tesla .

Therefore, although Nvidia’s valuation is very high, it will not be a concern for the market until the quarterly revenue growth slows significantly. Moreover, with strong fourth-quarter revenue guidance, it is not surprising that Nvidia set a new performance record and shocked Wall Street.

This article does not constitute and should not be regarded as any agreement, offer, invitation to offer, opinion or suggestion for the purchase of securities or other financial products. Nothing in this article constitutes Tiger International’s opinions on investment, law, accounting or taxation, nor does it constitute a statement on whether a certain investment or strategy is suitable for your personal circumstances, or any other personal recommendation for you.

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