Image: Nvidia has been a market darling, and the company did not disappoint in its fourth-quarter fiscal 2024 report.
By Brian Nelson, CFA
Nvidia (NVDA) reported fantastic fourth-quarter fiscal 2024 results on February 21 that handily beat the consensus forecast for both the top and bottom lines. Shares of Nvidia have surged since the beginning of 2023, and the quarterly report and outlook for the first quarter fiscal 2025 pleased even the most cautious investors. We believe that the market is still in the very early innings of investment into artificial intelligence [AI], and Nvidia has the lead when it comes to advanced chipmaking. The high end of our fair value estimate range of Nvidia stands north of $800 per share, implying that Nvidia’s shares, while trading below the highest of the range, still have room to run.
During the fourth quarter, Nvidia set records almost across the board. The company reported record quarterly revenue, up 265% from the year-ago period, thanks to record quarterly Data Center revenue, which was up 409% from last year’s quarter. Nvidia’s non-GAAP gross margin came in at 76.7% in the fourth quarter, up from 75% in the third quarter and 66.1% in the same period a year ago. Demand continues to be so strong that Nvidia is getting resilient pricing, while it scales costs across a larger revenue base. Non-GAAP earnings per share came in at $5.16 in the quarter, up 486% from the same period last year. The commentary in the press release was quite bullish:
Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries and nations. Our Data Center platform is powered by increasingly diverse drivers — demand for data processing, training and inference from large cloud-service providers and GPU-specialized ones, as well as from enterprise software and consumer internet companies. Vertical industries — led by auto, financial services and healthcare — are now at a multibillion-dollar level.
Nvidia’s net cash provided by operating activities soared to $28.09 billion during fiscal 2024, up from $5.64 billion in fiscal 2023, while the company’s capital spending fell to ~$1.07 billion from ~$1.83 billion in fiscal 2023. Free cash flow totaled ~$27.02 billion in fiscal 2024, up from ~$3.81 billion in fiscal 2023, a huge increase. Looking to the first quarter of fiscal 2025, Nvidia’s revenue is expected to be $24 billion, plus or minus 2%, above expectations, while non-GAAP gross margin is targeted at 77%, implying further profitability expansion on a sequential basis. The company ended the fiscal year with ~$25.98 billion in cash and cash equivalents, while short- and long-term debt totaled ~$9.71 billion, good for a very robust net cash position.
We like what we’re seeing at Nvidia these days, and what it implies for big cap tech and large cap growth, and we expect ongoing strength at the company. Competition from AMD (AMD) and others is looming, but Nvidia continues to capture the lion’s share of AI investment at this time, and that will likely continue for some time yet. Speculative investors have made a bundle on Nvidia during the past 12-18 months, but we’ve been quite satisfied with the performance of Best Ideas Newsletter portfolio holding, the Technology Select Sector SPDR (XLK), which includes Nvidia as one of its top three holdings. Nvidia’s shares are showing strength after the quarterly report.
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Tickerized for NVDA, SMCI, AMD, XLK, SOUN, BBAI, AI, AVGO, QCOM, MU, MRVL, ARM, TSM
Brian Nelson owns shares in SPY, SCHG, QQQ, DIA, VOT, RSP, and IWM. Valuentum owns SPY, SCHG, QQQ, VOO, and DIA. Brian Nelson’s household owns shares in HON, DIS, HAS, NKE, DIA, RSP, SCHG, QQQ, QQQM, and VOO. Some of the other securities written about in this article may be included in Valuentum’s simulated newsletter portfolios. Contact Valuentum for more information about its editorial policies.
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