Two Analysts Warn About Nvidia’s Valuation
I’m grateful, however, that there are at least a couple of contrarian voices on Wall Street. For instance, WealthWise Financial CEO Loreen Gilbert warned, “if you look at the forward PE of Nvidia right now trading at over 200 times, that seems like an unreasonable valuation.”
I agree 100% with this assessment.
To sustain that high valuation, Gilbert continued, “we’d have to see some catalyst for a huge surge in sales or some efficiencies in profit margins.”
Again, the theme here is that Nvidia will have to live up to investors’ sky-high assumptions and expectations.
In a similar vein, Morningstar Chief U.S. Market Strategist David Sekera characterized NVDA stock as “overvalued.” Sekera cited that fact that the stock was “currently at about a 30% premium above our $300 fair value estimate.”
Don’t get the wrong idea here. Sekera doesn’t believe that Nvidia is a bad company, and neither do I. Sekera’s point, and my point as well, is simply that “the valuation has just gotten ahead of itself at this point in time.”
This Is a Time for Caution With NVDA Stock
For overeager Nvidia bulls, now is a great time to put things into perspective. There’s nothing wrong with taking profits after a stock has more than doubled in less than six months.
It’s fine to believe in the future of AI and Nvidia. However, Nvidia will have a tough time living up to the market’s future growth expectations for the company.
At least two analysts/strategists seem to agree with me on that point. Therefore, I invite you to consider scaling back on your position in NVDA stock if you have one. And if you’re not invested in Nvidia now, there’s no urgent need to buy the shares at their current price.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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