Nvidia's Stock Price Is Detached From Reality
Nvidia is trading at valuations on par with some of the biggest bubbles in US history, with a Price/Sales ratio of 25x and Price/Free Cash Flow ratio of 175x.
Such extreme valuation ratios are rare for large established companies as growth is a declining function of market size, suggesting equity losses are likely even if earnings grow rapidly.
Reasonable assumptions put the fair value of Nvidia at $64 billion, 90% below current levels.
The extreme valuation of Nvidia's $NVIDIA(NVDA.US$ stock suggests holders are likely to experience negative returns for years if not decades to come as they learn first-hand that great companies do not always make great investments. The 34% decline in Tesla’s $Tesla(TSLA.US$ share price since its peak valuation in January 2021, despite a 13-fold rise in earnings, should be a warning sign, as should the performance of Cisco $Cisco(CSCO.US$ following the dot com bubble peak. Nvidia is trading at similarly extreme levels as we saw at these bubble peaks, with a price-to-sales ratio of 25x and a price to free cash flow ratio of 175x.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
