It seems that many of the most popular stocks among investors have jumped on the stock split bandwagon, but the historic volatility currently plaguing Wall Street has taken center stage. The S&P 500 and the Nasdaq Composite both have languished in the correction, while the tech-heavy Nasdaq has plunged into bear market territory, currently down 23% from its November high.
This is creating some attractive opportunities. nvidia (NVDA -9.24%) enacted a 4-for-1 stock split less than a year ago, after years of strong growth that had pushed the stock out of reach for many retail investors. However, the bear market has weighed on the chipmaker, sending its shares down more than 40%, even as the company generated record results.
one for the books
To understand the magnitude of the opportunity, investors must first look at Nvidia’s recent financial performance. In fiscal 2022 (ending January 30), Nvidia generated revenue of nearly $27 billion, up 61% year-over-year, while its earnings per share (EPS) of $3.85 was up 123%. But that is only part of the story. In addition to record fiscal year results, Nvidia generated record fourth quarter results in its gaming, data center and professional display segments.
This strong performance was driven by continued strong demand for its graphics processing units (GPUs), which are the best choice for both hardcore and casual gamers, driving its gaming revenue by 61% for the year. last. While that would be reason enough to be optimistic about Nvidia’s growth prospects, that’s just the beginning.
head in the clouds
Several years ago, the semiconductor maker saw the danger and focused its efforts on creating processors for cloud computing and data centers. The parallel processing capability of Nvidia GPUs, which process a multitude of complex mathematical calculations simultaneously, also made it uniquely suited to handling lightning-fast data movement through the aether, resulting in faster response times. fast for users.
Don’t take my word for it. Amazon Web services (AWS), Alphabetfrom Google Cloud, and Microsoft Azure entrusts its processing to Nvidia, as does alibaba Cloud, IBM cloud, and Oracle Cloud, and those are just the big dogs. Many other cloud and data center providers trust Nvidia.
Wide adoption by cloud platforms large and small drove company data center revenue by 58% in fiscal 2022.
More where that came from
Management expects the company’s strong growth to continue. Nvidia forecasts first quarter fiscal 2023 revenue of $8.1 billion, up 43% year-over-year at the midpoint of its guidance and up 6% sequentially. The company also expects to expand its already juicy gross profit margin by about 50 basis points.
It is easy to understand why. The gaming, cloud computing, and data center markets are growing by leaps and bounds. In total, management estimates that Nvidia’s total addressable market will grow to $250 billion by 2023, suggesting that the company has just scratched the surface of a large and growing opportunity, particularly in light of its fiscal 2022 revenue. of just $26.9 billion. As the leading supplier of chips used by gamers, cloud enthusiasts, and data centers alike, Nvidia is well positioned to take advantage of these trends.
Given its industry-leading position, strong secular tailwinds, and accessible mass market, Nvidia is the clear choice to buy stock splits now, at a discount, and hold forever.