The Bottom Line:
- Nvidia briefly became the second most valuable company, surpassing Apple with a market cap just below Microsoft.
- The company announced a 10-for-1 stock split, making shares more accessible to investors.
- The author shares personal investment experiences, including buying Nvidia shares at different price points based on revaluation of intrinsic value.
- Through discounted cash flow valuation, the author provides updated intrinsic value estimates for Nvidia post-stock split.
- The analysis includes a base case and a pessimistic valuation, with considerations for Nvidia’s future growth potential in free cash flow and total addressable market.
Nvidia’s Rise to the Top: Surpassing Apple and Closing in on Microsoft
Revaluation of Nvidia Shares
Nvidia briefly surpassed Apple to become the second most valuable company in the world, trailing behind Microsoft. After selling and revaluing their shares, the intrinsic value of Nvidia increased significantly, leading to a decision to repurchase shares at a higher price.
Impact of Stock Split on Nvidia’s Valuation
Nvidia announced a 10 for 1 stock split, which aimed to make the shares appear more affordable. The intrinsic value of the business remains the same after a stock split, as it only changes the share price and number of outstanding shares.
Analysis of Nvidia’s Valuation and Future Growth Potential
Utilizing a discounted free cash flow valuation method, Nvidia’s base case valuation projected a growth rate of 40.74% for the next five years. This valuation method included factors such as projected growth rates from various sources and a discount rate based on the cost of equity. The pessimistic valuation, using the lowest growth rate projection, provided a more conservative estimate.
Unpacking the 10-for-1 Stock Split: What It Means for Investors
Unpacking the 10-for-1 Stock Split: What It Means for Investors
Nvidia briefly surpassed Apple to become the second most valuable company in the world, trailing behind Microsoft. After selling and revaluing their shares, the intrinsic value of Nvidia increased significantly, leading to a decision to repurchase shares at a higher price.
Nvidia announced a 10 for 1 stock split, which aimed to make the shares appear more affordable. The intrinsic value of the business remains the same after a stock split, as it only changes the share price and number of outstanding shares.
Utilizing a discounted free cash flow valuation method, Nvidia’s base case valuation projected a growth rate of 40.74% for the next five years. This valuation method included factors such as projected growth rates from various sources and a discount rate based on the cost of equity. The pessimistic valuation, using the lowest growth rate projection, provided a more conservative estimate.
Personal Investment Journey: Buying Nvidia Shares at Different Price Points
Personal Investment Journey: Buying Nvidia Shares at Different Price Points
Nvidia recently experienced a surge in market value, almost surpassing Apple to become the second most valuable company globally. After initially purchasing Nvidia shares at $150 in late 2022 and subsequently selling them at $380 due to perceived high valuation compared to intrinsic value of $200, I later revalued the business and found its intrinsic value had risen to around $400. This led me to repurchase shares at an average price of $490, despite concerns from some students and subscribers.
Understanding that a business’s intrinsic value is dynamic, changing based on growth and other factors, motivated me to make the decision to buy back the shares at a higher price. Nvidia’s unique nature, where earnings reports consistently show significant revenue and free cash flow growth, required continuous revaluation. The stock price continued to rise, reaching $1,255 before a 10-for-1 stock split was announced, making shares more affordable but not altering the underlying business’s value.
Utilizing a discounted free cash flow valuation method, my analysis projected Nvidia’s future growth potential with a base case growth rate of 40.74% for the next five years. Taking into account various growth rate projections from different sources and applying a discount rate based on equity costs, I arrived at a valuation range for Nvidia. This range allowed for a fair assessment of the stock’s value, considering its historical growth rate and potential for continued success.
Intrinsic Value Estimates Post-Split: A Discounted Cash Flow Analysis
Discounted Cash Flow Analysis for Intrinsic Value Estimates Post-Split
My base case valuation for Nvidia is based on a projected growth rate of 40.74% for the next five years, derived from averaging growth rate projections from various sources like Finis, Yahoo Finance, Zach, and Guru Focus. This method involves projecting future free cash flows, discounting them to present value, and considering current assets, investments, and debt. The intrinsic value per share was $1,221 before the share split, which increased tenfold after the 10-for-1 split to $122.
Valuation Range and Pessimistic Valuation
Having a pessimistic valuation approach, I choose the lowest growth rate among sources, leading to a conservative intrinsic value estimate of $94 per share. This range of valuations, including the base case and pessimistic scenarios, allows for a comprehensive assessment of Nvidia’s stock value, presenting potential growth opportunities and risks.
Future Growth Potential: Free Cash Flow and Total Addressable Market Projections
Nvidia’s Future Growth Potential: Analysis of Free Cash Flow and Total Addressable Market Projections
Utilizing a discounted free cash flow valuation method, the base case projection for Nvidia’s growth rate over the next five years stands at 40.74%. This figure is derived from averaging growth rate projections from various sources and considering a discount rate based on the cost of equity. The analysis includes projecting future free cash flows, discounting them to present value, and accounting for current assets, investments, and debt.
Evaluation of Valuation Range and Pessimistic Scenario
In assessing Nvidia’s stock value, a range of valuations is considered, encompassing both base case and pessimistic scenarios. The pessimistic approach involves selecting the lowest growth rate among sources, leading to a conservative intrinsic value estimate of $94 per share. By considering both potential growth opportunities and risks, a comprehensive assessment of Nvidia’s stock value can be achieved.
Intrinsic Value Estimates Post-Split: Insights from Discounted Cash Flow Analysis
Before the stock split, Nvidia’s intrinsic value per share was $1,221, based on a projected growth rate of 40.74% for the next five years. Following the 10-for-1 split, the number of shares increased tenfold, resulting in a revised intrinsic value of $122 per share. This analysis provides insights into the impact of the stock split on Nvidia’s valuation and intrinsic worth.
