Nvidia’s share price fell after each of its last five impressive quarterly earnings announcements.
As Nvidia’s revenue and profits continue to rise, its price-to-sales ratio continues to fall.
If Nvidia’s shares move closer to their five-year average valuation, and revenue keeps rising as planned, the stock price could double.
Over the past year, Nvidia (NASDAQ: NVDA) shareholders have had to take the good with the bad. For the last five consecutive quarters, the company has reported blowout quarterly results. That’s good. But Nvidia’s stock price has dropped immediately following each announcement. That’s bad.
Luckily, it hasn’t kept shares from growing by 25% over the past year, handily beating the S&P 500 (up 18%). But it has been frustrating for investors to see the company’s valuation metrics keep dropping as its revenue and profits keep climbing.
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But I think that Nvidia’s share price will continue to rise over the next four years.
Right now, a single share of Nvidia is trading at $220.70. That means you could buy five shares today for $1,104.
Here’s what I think those five shares would be worth in 2030.
Image source: Nvidia Corporation.
Nvidia’s trailing price-to-sales (P/S) ratio of 17.8 is well below the five-year average of 25.4, and the company’s forward P/S ratio is at an even lower 13 (lower is better).
If Nvidia’s shares had a P/S ratio of 25.4 today, they’d be trading at $315.46/share. Just FYI, the company’s P/E ratio experienced a huge spike in 2023 that skews the average, which is why I’m using the P/S ratio for these calculations.
I believe that once it becomes clear that the AI spending boom isn’t fizzling out anytime soon, Nvidia’s valuation will move closer to its historical average.
Meanwhile, Nvidia CEO Jensen Huang believes that the company’s revenue will jump 70% in fiscal 2028, with further gains in future years. If he’s right, a 70% increase in sales at a P/S ratio of 25.4 would put the share price at $536.28 per share by 2028. That’s about double its current price!
There could be further gains between 2028 and 2030. But to account for potential setbacks and continuing fears of an AI bubble, I’m going to use that price and predict that five Nvidia shares will be worth at least $2,681.41 by 2030.
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John Bromels has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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