Again, no trade recommendation.
Can NVDA stock generate 30-35% annualilzed return for next 5 years? some friends asked me.
Well, lets do some exercise.
We all know that stock return is driven by two things--multple expansion (or contraction), and ESP growth (or declining).
the first exercise is --let's assume NVDA can keep today's multiple in next 5 years ( no multple expansion, nor contraction). In that case, the 35% return will be solely driven by ESP growth. That means NVDA has to growth its EPS by 35% annually in next 5 years. With declining GM, NVDA will have to growth its revenue by more than 35% annually in next 5 years. I guess, it is very ambitous assumption.
The second exercise is--if NVDA can not grow its EPS by 35% annually in next 5 years, to achieve the 35% annual return, it will needs multiple expansion from here. With declining GM, decelerating sale growth, how much multiple expansion from here we can count on in the valuation ?
Again, NVDA is a great company in AI age, it has made a lot of contribution to the AI revolution. hope that it will continue do very well, and create great value for investors.
