Nvidia is expected to be the best performer in the S&P 500 through 2025, by this measure
By Philip van Doorn
Next Wednesday's earnings report could be another catalyst as Nvidia continues to dominate the AI hardware build-out
Investors have gotten used to incredible year-over-year comparisons during the past several quarters for Nvidia Corp., which continues to lead the market for graphics-processing units being deployed by data centers to support their corporate clients' build-out of artificial-intelligence technology.
Nvidia (NVDA) is scheduled to announce results for the fourth quarter of its fiscal 2024 next Wednesday at 5 p.m. Eastern time. The consensus among analysts polled by FactSet is for the company to report quarterly sales of $20.28 billion, up from $6.05 billion a year earlier.
A year-over-year comparison of the company's sales results doesn't tell the full story. Nvidia's sales increased rapidly during each of the past three quarters as GPU sales for AI deployment - essentially a new market last year - took off. The quarterly sales number of $20.28 billion expected next week would be a 12% sequential increase from the $18.12 billion during the company's third quarter of its fiscal 2024, which ended Oct. 29.
Nvidia's soaring sales and profits have set the stage for its shares to more than triple in value over the past year. So an important question for investors now is how long the company can maintain a high pace of growth for sales.
To help answer that question, we screened consensus sales estimates among analysts polled by FactSet for the S&P 500 SPX. We used FactSet's adjusted calendar-year numbers for the estimates, with 2023 as a baseline. So the 2023 numbers are actual for companies whose fiscal years match the calendar and that have already reported their fourth-quarter results. For other companies - about 20% of the S&P 500 - with fiscal years that don't match the calendar, the 2023 numbers are estimates based mainly on results reported last year.
Based on the consensus estimates through calendar 2025, these 20 companies in the S&P 500 are expected to show the highest compound annual growth rates for sales. The sales estimates are in millions.
Company Ticker Two-year est. sales CAGR through 2025 Est. 2023 sales Est. 2024 sales Est. 2025 sales Price/ 2025 EPS estimate Price/ 2025 sales-per-share estimate Nvidia Corp. NVDA 38.9% $56,430 $90,505 $108,861 29.9 16.8 Micron Technology Inc. MU 35.8% $17,927 $25,871 $33,053 12.1 2.7 First Solar Inc. FSLR 27.2% $3,482 $4,563 $5,632 7.6 3.0 Newmont Corp. NEM 24.7% $11,314 $16,613 $17,597 12.7 2.1 Blackstone Inc. BX 24.7% $9,791 $12,552 $15,228 20.9 10.1 Diamondback Energy Inc. FANG 22.2% $8,236 $8,720 $12,291 8.5 2.5 Eli Lilly & Co. LLY 21.9% $34,123 $41,112 $50,669 42.1 14.2 Take-Two Interactive Software Inc. TTWO 21.6% $5,298 $6,690 $7,835 19.0 3.4 Broadcom Inc. AVGO 21.0% $38,133 $50,697 $55,842 22.2 10.6 ServiceNow Inc. NOW 21.0% $8,971 $10,896 $13,137 49.5 12.4 Axon Enterprise Inc. AXON 20.8% $1,552 $1,879 $2,265 50.4 9.0 Advanced Micro Devices Inc. AMD 19.9% $22,680 $25,965 $32,615 32.7 8.9 Insulet Corp. PODD 19.5% $1,648 $1,979 $2,353 56.1 5.6 DexCom Inc. DXCM 19.2% $3,622 $4,323 $5,146 52.5 8.7 Oneok Inc. OKE 18.8% $19,034 $24,991 $26,864 12.8 1.5 Palo Alto Networks Inc. PANW 18.4% $7,428 $8,827 $10,408 52.4 11.2 Tesla Inc. TSLA 18.0% $96,775 $111,142 $134,764 44.6 4.5 Targa Resources Corp. TRGP 17.8% $15,610 $19,202 $21,670 12.5 0.9 Extra Space Storage Inc. EXR 17.4% $2,440 $2,959 $3,362 25.3 9.1 Western Digital Corp. WDC 16.6% $12,493 $14,736 $17,000 9.6 1.1 Source: FactSet
Click on the tickers for more about each company, fund or index.
Click here for Tomi Kilgore's detailed guide to the wealth of information available for free on the MarketWatch quote page.
We have included price-to-earnings and price-to-sales figures, based on Feb. 14 closing prices and consensus estimates for calendar 2025. In comparison, the S&P 500 trades for 18.2 times the weighted aggregate consensus estimate for 2025 and 2.5 times the weighted sales estimate for that year. The S&P 500's expected two-year sales CAGR through 2025, based on the weighted consensus estimates, is 5.3%.
So Nividia's price ratios based on the 2025 estimates are high, but you pay a premium for rapid sales growth. And its price-to-sales ratio is high relative to the price-to-earnings ratio because the company's marginal profit is so high for the GPUs.
Let's end with a summary of analysts' opinions of these stocks. Keep in mind that most analysts working for brokerage firms set 12-month price targets, which may be considered a relatively short period for long-term growth investors.
Company Ticker Share buy ratings Share neutral ratings Share sell ratings Feb. 14 price Consensus price target Implied 12-month upside potential Nvidia Corp. NVDA 92% 8% 0% $739.00 $711.50 -4% Micron Technology Inc. MU 75% 22% 3% $81.83 $99.55 22% First Solar Inc. FSLR 82% 18% 0% $158.24 $224.71 42% Newmont Corp. NEM 61% 35% 4% $32.12 $47.50 48% Blackstone Inc. BX 46% 54% 0% $127.95 $126.45 -1% Diamondback Energy Inc. FANG 83% 17% 0% $169.86 $187.96 11% Eli Lilly & Co. LLY 74% 19% 7% $757.31 $755.75 0% Take-Two Interactive Software Inc. TTWO 78% 18% 4% $155.72 $176.04 13% Broadcom Inc. AVGO 71% 29% 0% $1,262.22 $1,234.98 -2% ServiceNow Inc. NOW 88% 12% 0% $792.00 $847.31 7% Axon Enterprise Inc. AXON 85% 15% 0% $270.84 $264.38 -2% Advanced Micro Devices Inc. AMD 76% 22% 2% $178.70 $193.38 8%
(MORE TO FOLLOW) Dow Jones Newswires
02-17-24 0715ET
Copyright (c) 2024 Dow Jones & Company, Inc.-
4 Predictions for Stocks and the Economy for the Second Half of 2024
-
What Broadening Rally? AI Stocks Dominate Again In Q2
-
After Earnings, Is Nike Stock a Buy, a Sell, or Fairly Valued?
-
Worst-Performing Stock ETFs of the Quarter
-
Top-Performing Stock ETFs of the Quarter
-
Q2 In Review and Q3 2024 Market Outlook
-
5 Stocks to Buy for 3Q 2024
-
Best- and Worst-Performing Stocks of Q2 2024
-
Industrials: Sector Offers Investment Opportunities as Performance Lags Broader Market
-
Consumer Defensives: Even Amid Macro Pressures, Deals Permeate the Landscape
-
33 Undervalued Stocks
-
Utilities: Can the Stocks Keep the Rally Going?
-
Basic Materials: Following Index Decline, We See Many Long-Term Opportunities
-
Healthcare: Valuations Look Attractive In Most Industries
-
Financial Services: Amid Uncertainties, We See the Most Value In Banks and Credit Services
-
Consumer Cyclicals: Even With Anxiety Over Spending, We See Attractive Valuations