Are NVIDIA sales and Apple purchases limited to 1 day? Check the earnings forecasts and room for growth of the two giants!
In the US market on June 11, $Apple(AAPL.US$soared to 7.3%Then, it hit an all-time high. Meanwhile, $NVIDIA(NVDA.US$fell after hitting an all-time high,0.8% lowerIt became. It looks like NVIDIA, which is the leader of the winning team due to the AI boom, and Apple, which has been branded as a loser, have been reversed.
Is “selling NVIDIA, buying Apple” for 1 day only, or is it a new trendWill it continue as Of the two companies that influence itOverall inspection of earnings forecasts and valuations, room for stock price increases, and stock supply and demandI'll do it.
●Comparing the two companies
Even if you look at it in the short to medium to long term,NVIDIA's growth rate is overwhelmingly higher than Apple. Whereas NVIDIA's performance growth is expected to be appropriate as a representative growth stock, Apple is expected to remain in the single-digit range.
●Individual performance trends
★NVIDIA ★
★NVIDIA ★
・The growth rate (forecast) of earnings is expected to continue to be at a high level compared to other growth stocks when viewed in absolute terms. On the other hand, there is a possibility that the period when profit growth continues to grow at an explosive pace has passed, and growth is expected to slow slightly in the future.
・On a fiscal year basis, there is a possibility that growth in the next fiscal year will slow significantly from this fiscal year. $Alphabet-A(GOOGL.US$Ya $Amazon(AMZN.US$、 $Morgan Stanley(MS.US$、 $Meta Platforms(META.US$There is a possibility that AI investments by big tech will go round and round. Big Tech accounts for 40 to 50 percent of sales in NVIDIA's data center division.
・In order to reduce dependence on Big Tech, NVIDIA is focusing on sales to companies and government agencies other than Big Tech. Strong in this field $Dell Technologies(DELL.US$ Strengthening partnerships with will play an important role in implementing that strategy. If the pace of AI introduction in this field exceeds market expectations, it is expected that it will lead to an upward revision of earnings forecasts.
・Currently, there is little performance-related news flow, and since the event called the split has also passed, the stock price increase may be slightly heavy.
★ apple ★
・Based on the growth rate of performance, it is difficult to say that it is a growth stock anymore. However, there is a high possibility that the bottom of performance was the previous quarter on a quarterly basis and the previous fiscal year on a fiscal year basis. A gradual recovery in business performance is expected in the future.
・A sense of delay in AI strategy has also overshadowed earnings forecasts, but the long-awaited AI function was announced at the World Developers Conference (WWDC) starting 6/10. There were no surprises in the announcement, and stock prices fell on 6/10, but there was a sharp rebound on 6/11. Multiple analysts have predicted that the installation of an AI function may encourage a replacement cycle. There were also analysts who raised investment decisions and target stock prices.
★ NVIDIA ★(As of 6/11)
・Stock closing price: $120.91 (revised stock price after split)
・Room for improvement: Approximately 3% compared to the average target stock price of $124.71
(The most bullish target share price is $150, which suggests room for a 24% increase)
・Expected PER(Price-earnings ratio): 42 times (higher than the past average, no sense of undervaluation, but lower than some growth stocks)
★ apple ★(As of 6/11)
・Stock closing price: $207.15
・Room for improvement: Almost none compared to the average target stock price of $205.80
(The most bullish target share price is 275 dollars, which suggests room for 32% increase)
・Expected PER: 30 times (higher than the past average, no sense of cheapness)
・Stock closing price: $207.15
・Room for improvement: Almost none compared to the average target stock price of $205.80
(The most bullish target share price is 275 dollars, which suggests room for 32% increase)
・Expected PER: 30 times (higher than the past average, no sense of cheapness)
★ NVIDIA ★
Judging from the movement after the stock split, the upper price was slightly heavy on the stock price, and the turnover decreased by 30 to 40 percent from just before the split. Some expectations that individual investors' purchases will flood in due to the split were completely overshadowed. There is a possibility that a certain number of people already hold NVIDIA shares, and it also seems that there were investors who had already carried out purchases in anticipation of stock appreciation before the split. Note that stocks are easier to buy due to the split, but corporate value and stock price valuation do not change.
★ apple ★
The trading volume on 6/10, when WWDC began, nearly doubled from before WWDC. When it surged on 6/11, it doubled even more than the day before. Apple, which had clearly missed out due to its AI strategy, announced the long-awaited AI function, and several analysts showed a bullish outlook, so the purchase went in. In view of NVIDIA's popularity and Apple's unpopularity over the past 1 to 2 years, it seems that Apple's ownership ratio is relatively low. There is a possibility that this also led to a sharp backlash on 6/11.
The trading volume on 6/10, when WWDC began, nearly doubled from before WWDC. When it surged on 6/11, it doubled even more than the day before. Apple, which had clearly missed out due to its AI strategy, announced the long-awaited AI function, and several analysts showed a bullish outlook, so the purchase went in. In view of NVIDIA's popularity and Apple's unpopularity over the past 1 to 2 years, it seems that Apple's ownership ratio is relatively low. There is a possibility that this also led to a sharp backlash on 6/11.
Also, Brad Garstner, the founder and CEO of Ultimator Capital, revealed on the CNBC program that he purchased Apple stock before WWDC. He said, “I think the integration with (Apple's) OpenAI will be deeper than what I heard yesterday.” He also stated, “I don't think Apple will necessarily be the winner of the AI competition, but I anticipate that the company will be one of the main players in the competition.”
Mr. Garstner is one of the people who predicted that an “AI supercycle” is approaching. NVIDIA shares were purchased from the latter half of 2022. Mr. Garstner continues to predict that NVIDIA's stock price will outperform over 2024 and 2025. It can be said that this is just one example of institutional investor trends.
There is a possibility that exchange-traded fund (ETF) rebalancing will also affect the supply and demand of NVIDIA and Apple. The background is that NVIDIA's total market capitalization temporarily surpassed Apple. According to Bloomberg, if NVIDIA maintains an advantage over Apple as of 6/14, there is a possibility that the world's largest technology ETF (XLK) will adjust the ratio of constituent stocks (rebalance at the end of the month). As a result, “State Street Global Advisors, which operates XLK, may accumulate NVIDIA shares equivalent to 10 billion dollars. On the other hand, it is necessary to let go of about 11 billion dollars of Apple stock,” Bloomberg estimated. It seems necessary to keep in mind the total market capitalization of both companies as of 6/14.
●When compared to the average target stock price, $NVIDIA(NVDA.US$The room for growth is about 3%, $Apple(AAPL.US$It is in a state where it is almost none. Based on the divergence ratio from the target stock price of the most bullish analyst, it is estimated that NVIDIA has room to rise by 24% and Apple has room to rise by 32% (both as of 6/11).
●On the valuation side, both companies currently have little sense of being cheap. When future earnings forecasts are also taken into account, it is easier for NVIDIA to accept slightly higher valuations as growth stocks. At the time of adjustment, it may be easier to enter in high-profile purchases from the viewpoint of medium- to long-term investments. Apple has no high growth potential, but it has finally launched an AI strategy. It's easy to have expectations for future performance surprises and late schedule corrections.
●On the supply and demand side, based on the movements of the past 2 days alone, it seems that the motivation to buy Apple is currently higher. As a background, considering NVIDIA's popularity and Apple's unpopularity over the past 1 to 2 years, there is a possibility that Apple's ownership ratio is relatively low. If Apple's stock price continues to rise, there is a possibility that new investment funds will come in. Also, the world's largest technology ETF ( $The Technology Select Sector SPDR® Fund(XLK.US$There is a possibility that the rebalance of) will also have an impact on the stock supply and demand of both companies, and it seems necessary to keep an eye on that trend (XLK can also be said to be a means of investing in tech stocks).
●Looking at trends in the US market as a whole, the buying base is expanding, with NVIDIA suppliers, AI-related software stocks, and power stocks of hidden AI-related brands being bought rather than a state where NVIDIA alone won this year. There is also such a background to buying Apple. This is because NVIDIA is not necessarily the only one to benefit from the AI boom, which is a major technological innovation. Additionally, since NVIDIA's stock doubled in just half a year, some speed adjustment (schedule and price range adjustment) may also be necessary. However, it is also true that NVIDIA is expected to benefit the most from the AI boom for the time being.
●Overall, for medium- to long-term AI investments, it may be better to build an “NVIDIA +N” position like Mr. Garstner, who predicted the “AI super cycle.” Investors would also like to consider developing investment strategies based on their own portfolios (for example, concentration on NVIDIA, etc.).
★Also, regarding the details of Apple's WWDC, the reactions of analysts who received it, and stock price performance after WWDC in previous years,”Apple 7% higher! Is the next step to become the world leader in terms of market capitalization?Please refer to”.
Created 6/12/24 Market Analyst Amelia
Source: Company materials and created by MooMoo Securities from Bloomberg
Source: Company materials and created by MooMoo Securities from Bloomberg
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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