AMD P/E ratio is ~185
Nvidia P/E ratio is ~65
Yet I constantly hear how Nvidia is overvalued.
Nvidia P/E ratio is ~65
Yet I constantly hear how Nvidia is overvalued.
Nvidia EV/EBITDA is 54.64
https://www.investopedia.com/ask/answers/072915/how-can-eveb...
It seems like neither P/E ratio nor EV/EBITDA is a perfect measure. EV/EBITDA excludes capital expenses, but it also excludes amortization costs, which for AMD means the Xilinx acquisition.
To try to play the anti-nvidia side, they are in a very good position now, but at 65 P/E where do they grow beyond the current frothy expectations so new investors can see stock price appreciation? Especially with companies seeing the profits desiring to compete.
With AMD, you can see past performance with higher earnings and be optimistic that they can hit past earnings bringing the P/E ratio into alignment.
That's the bear perspective.
There's a lot more wealth tied up in Nvidia, so there is more interest and worry. They are also more associated with hyped up tech like Bitcoin and AI. Whether you believe in those technologies in the long term determines whether you're likely to think Nvidia can maintain.
With everyone dumping on Intel lately, AMD also looks like the primary CPU manufacturer.
I have no idea what will happen, or what either is worth. But like Apple, at some point the market is the limiting factor, not the company.
Looking at Morgan Stanley's estimates for NVDA, their base case values them at $150.00 12 months from now, which is ~42x CY25 EPS of $3.57. According to the same report, the mean consensus estimate is ~$137.88 which if you assume the same EPS, equates to ~38.6x (this is from an Aug 29, 2024 report, which came out after NVDA's latest earnings, as usual)
For AMD, in the report that came out yesterday, the analysts values them at $169.00 which is ~43x FY2025 EPS of $3.94, below consensus estimates of $188.77 which imply a ~47.9x forward P/E ratio
Now this comes with a bunch of caveats like the different dates, the fact that each analyst has their own view on forward EPS, the fact that I picked just a couple of reports instead of looking at all analysts, the different periods from AMD's FY 2025 vs. NVDA's CY 2025... but two things appear to remain true: (1) trailing PE multiples are useless and the sooner we stop mentioning them the better and (2) the discrepancy in multiples you pointed out doesn't hold up to scrutiny
Diligencing the above caveats is left as an exercise to the reader
But at least it's more connected to the actual current value of the stock seeing that it is defined by future not past cash flows
It doesn't matter if those are the right cash flows, you're really trading based on the market's expectations of those cash flows anyway
Clever!
But it does make the opposition's point: while many will never acknowledge trouble in hindsight,it's much less common to acknowledge trouble in foresight ;)
Re: trouble in foresight, analysts and practitioners try to account for that by creating scenarios. Note I cited the base case for the Morgan Stanley reports, but those also include a bear case and a bull case. Naturally those still depend on assumptions...
Trailing P/E needs less caveats but is also less predictive.
It's impressive that Nvidia has been delivering explosive growth in their earnings to match their valuation, but it is valid to be concerned whether the world can keep investing in GPUs like this sustainably.
Company just put up ~7B in a quarter at 50% gross margin. Market cap is 240B. So about 9x a year's revenue, for a fabless semiconductor company. Looks crazy cheap to me, '132' P/E ratio and all.