Category: Stock Market

Now could be the time to pounce on Clinuvel Pharmaceuticals Limited (ASX: CUV) shares now if you want big returns for your portfolio.

That’s the view of analysts at Bell Potter, which are feeling very positive about the ASX 300 share.

Why is it an ASX 300 share to buy?

In case you’re not familiar with Clinuvel, it is a global specialty pharmaceutical company focused on developing and commercialising treatments for patients with genetic, metabolic, systemic, and life-threatening, acute disorders.

Its lead therapy is Scenesse, which is approved for commercial distribution in Europe, the USA, Israel, and Australia as the world’s first systemic photoprotective drug for the prevention of phototoxicity (anaphylactoid reactions and burns) in adult patients with erythropoietic protoporphyria (EPP).

The ASX 300 share is also seeking to expand Scenesse’s use into other treatment areas. It is this that is getting Bell Potter excited. It commented:

CUV are conducting two Phase 3 trials to expand the label of Scenesse to include patients with vitiligo. Following recent company announcements, we have revisited vitiligo development expectations and market forecasts. The first Phase 3 trial primary readout is expected in 2H CY25 and represents one of the next major catalysts for the company excluding financial results. Assuming the Phase 3 trials proceed smoothly, we expect submission to the FDA in late CY26 for potential approval by end-CY27.

Bell Potter notes that if successful, this expansion has the potential to be a huge boost to its sales. It adds:

With ~1% of the US population affected by vitiligo, the market size is far greater than the single rare disease for which Scenesse is currently approved. We estimate a directly addressable vitiligo market in the US of ~65-70k patients (vs. ~2k patients for EPP). This translates into legitimate potential for Scenesse to increase its annual sales several fold if the Phase 3 trials succeed and regulatory approval is granted.

Big return potential

In light of the above, the broker has reaffirmed its buy rating and $22.25 price target on the ASX 300 share. Based on its current share price of $14.60, this implies potential upside of 52% for investors over the next 12 months.

The broker concludes:

We view the first vitiligo Phase 3 readout in CY25 as a significant catalyst for the company and see the current CUV price as a good entry point for those willing to take on clinical risk with downside mitigated to a degree by the existing, profitable EPP franchise.

The post Guess which ASX 300 share could rise over 50% appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The National Australia Bank Ltd (ASX: NAB) share price has increased by more than 35% in the last 12 months, as shown on the chart below. Shareholders and other investors may wonder whether the good streak can continue in FY25.

NAB has a different reporting schedule than many other ASX shares. Its full-year ends on 30 September, while June is the last month of the financial year for Australian individuals and many businesses.

There are still three and a half months left of the ASX bank share‘s FY24, so commentary about the outlook could apply to both the end of FY24 as well as FY25.

Worsening arrears

At the beginning of May 2024, NAB reported its FY24 first-half result, which showed cash earnings of $3.55 billion (down 12.8% year over year).

One of the negatives within the result was that the percentage of its loans that were overdue by at least 90 days or impaired is increasing – it was 0.66% in the FY23 first half, 0.75% in the FY23 second half and 0.79% in the first half of FY24. This represented “higher arrears across the Australian home lending and business lending portfolios, partially offset by lower impaired assets.”

NAB said:

The Australian economy is proving resilient and most customers are faring well in the current more challenging environment. However, there remains continued uncertainty in the outlook including the impacts of global instability and the ability of customers to manage the full extent of higher interest rates and elevated cost of living pressures.

Strong competition

NAB reported in the HY24 result that revenue decreased by 3.7%, mainly reflecting “lower margins”.

The net interest margin (NIM) decreased by 5 basis points (0.05%) to 1.72%, while the underlying NIM declined 10 basis points. This reflected “lending margin competitive pressures primarily relating to housing lending, along with higher term deposit costs and deposit mix impacts.”

NAB said the benefits of a higher interest rate environment have been more than offset by competition while cost pressures remain elevated.

NAB shares its outlook

With the FY24 first-half result, the ASX bank share said the following:

With our new executive leadership team in place, we are considering how we evolve our strategic priorities. We start in a great place with strong, safe balance sheet settings and attractive growth options. While no major strategic pivots are needed, we are excited about opportunities to leverage the good work of the past several years to allow us to become even simpler and drive better outcomes for customers and colleagues while maintaining a disciplined approach. This will remain at the core of everything we do and underpin our ability to deliver sustainable growth and returns.

Forecasts

Analysts at broker UBS expect stronger results in FY25 than in FY24.

The broker currently forecasts that NAB could generate net profit after tax (NPAT) of $7 billion in FY24 and $7.15 billion in FY25. This would translate into earnings per share (EPS) of $2.21 in FY24 and $2.27 in FY25. While higher, this does not imply much growth in FY25.

UBS expects NAB shares to offer a fully franked dividend yield of around 5% over the next two financial years.

The broker currently has a sell on NAB shares because of a “fully valued” NAB share price. The price target is $30, implying a fall of 15% from where it is today.

The post Can owners of NAB shares bank on a good outlook for FY25? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The great news for growth investors is that there are plenty of quality options to choose from on the Australian share market.

But which ones could be buys in June?

Let’s take a look at five ASX growth shares that brokers rate highly:

Domino’s Pizza Enterprises Ltd (ASX: DMP)

This pizza chain operator has been struggling in recent years due to operational mishaps and inflationary pressures. While this is disappointing, there are signs that the worst could now be over and its fortunes could improve from FY 2025.

Morgan Stanley appears to believe this makes it a good time to make a patient investment in Domino’s. Last month, it put an overweight rating and $52.00 price target on its shares.

IPD Group Ltd (ASX: IPG)

Analysts at Bell Potter think that this distributor of electrical equipment and industrial digital technologies could be an ASX growth share to buy in June.

Its analysts expect the company to benefit from the electrification megatrend. They note that IPG is “a high quality play on the electrification growth trend which is emerging as a dominant market narrative.”

Bell Potter has the company on its preferred list with a buy rating and $5.60 price target.

Lovisa Holdings Ltd (ASX: LOV)

The team at Morgans is feeling very positive about Lovisa and sees it as an ASX growth share to buy this month.

It believes the growing fashion jewellery retailer is well-positioned to continue its strong form long into the future thanks to its large global expansion opportunity. It has previously noted that its plan to “enter mainland China in FY24, [is] paving the way for significant longer-term growth.” This expansion has since taken place and has started positively according to industry date.

Morgans currently has an add rating and $35.00 price target on its shares.

Treasury Wine Estates Ltd (ASX: TWE)

Morgans also thinks that Treasury Wine could be an ASX growth share to buy right now. This is partly due to its recent acquisition of DAOU Vineyards (DAOU) for US$900 million (A$1.4 billion).

The broker notes that “if TWE delivers on its investment case, there is material upside to our valuation.”

Morgans has an add rating and $14.03 price target on its shares.

Webjet Limited (ASX: WEB)

Finally, the team at Morgans is also bullish on online travel booking company Webjet.

It thinks Webjet could be an ASX growth share to buy thanks largely to its dominant WebBeds B2B business and the “significant market share still up for grabs.” Morgans believes this positions the company well for the future.

The broker has an add rating and price target of $11.20 on Webjet’s shares.

The post 5 top ASX growth shares to buy in June appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has positions in Domino’s Pizza Enterprises, Lovisa, and Treasury Wine Estates. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Domino’s Pizza Enterprises, Ipd Group, and Lovisa. The Motley Fool Australia has positions in and has recommended Ipd Group. The Motley Fool Australia has recommended Domino’s Pizza Enterprises, Lovisa, and Treasury Wine Estates. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Are you on the lookout for some new additions to your income portfolio in June?

Well, if you are, then read on. That’s because listed below are three ASX dividend stocks that brokers have recently named as buys and tipped to offer attractive dividend yields.

Here’s what you can expect from them in the coming years:

GDI Property Group Ltd (ASX: GDI)

Analysts at Bell Potter are tipping this property company’s shares as a buy. Especially given their expectation that GDI Property is well-positioned to pay some big dividends in the coming years.

For example, the broker is forecasting dividends per share of 5 cents across FY 2024, FY 2025, and FY 2026. Based on the current GDI Property share price of 61 cents, this implies dividend yields of 8.2% for the next three years.

Bell Potter has a buy rating and 75 cents price target on its shares.

Rural Funds Group (ASX: RFF)

Another ASX dividend stock that Bell Potter is feeling bullish about is Rural Funds.

It is another property company. However, it is very different to GDI Property. It owns a portfolio of high-quality agricultural assets. This includes across industries such as orchards, vineyards, water entitlements, cropping, and cattle farms.

In respect to dividends, the broker is forecasting dividends per share of 11.7 cents in both FY 2024 and FY 2025. Based on the current Rural Funds share price of $2.00, this will mean yields of 5.85% for investors.

Bell Potter currently has a buy rating and $2.40 price target on its shares.

Telstra Group Ltd (ASX: TLS)

A third ASX dividend stock that has been tipped as a buy is Telstra. It is of course Australia’s leading telecommunications company.

The team at Goldman Sachs continues to be positive on the company. It recently reiterated that its analysts “believe the low risk earnings (and dividend) growth that Telstra is delivering across FY22-25, underpinned through its mobile business, is attractive.”

Speaking of dividend growth, the broker is forecasting fully franked dividends of 18 cents per share in FY 2024 and then 18.5 cents per share in FY 2025. Based on the current Telstra share price of $3.55, this equates to fully franked yields of 5.1% and 5.2%, respectively.

Goldman currently has a buy and $4.25 price target on its shares.

The post Buy Telstra and these ASX dividend stocks now appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has positions in and has recommended Rural Funds Group and Telstra Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Hopes for interest rate cuts are once again on the horizon after Canada and Europe’s rate cuts earlier this month.

Lower interest rates are often seen as making money more accessible and could potentially boost consumer spending.

Central banks are contemplating these cuts in the hope of freeing up more money for consumers, thereby stimulating economic growth.

While predicting macroeconomic trends is almost pointless, investors can certainly assess which ASX retail shares could benefit from a potential uptick in consumer spending. Let’s explore.

Nick Scali Limited (ASX: NCK)

First up is furniture retailer Nick Scali. In 1H FY24, the company reported a 20% drop in revenue to $227 million. To be fair, this was off a high base a year ago when it reported a record revenue of $284 million, as the company benefitted from increased deliveries of the previous orders.

That said, its written sales orders — a leading indicator — were just up 1.1%, and they were down slightly by 0.4% on a same-store basis.

The good news is that the company has improved its costs. Gross margins rose from 62% in 1H FY23 to 65.6%, while general operating expenses fell by $4.8 million from a year ago. Tight cost control and better logistics costs were behind such impressive margin expansion.

The company started to see an uptick in its orders. In 2Q FY24, from October to December 2023, its written sales orders rose 8.2% from a year ago.

This sales momentum may continue if potentially lower interest rates lead to better consumer sentiment.

Nick Scali recently expanded into the United Kingdom market by acquiring Fabb Furniture, as my colleague James highlighted. This may be a wild card in the short term, depending on consumer sentiment in the UK. However, for the longer term, the company believes this provides a great expansion opportunity to a bigger UK market.

Nick Scali shares are trading at 13x trailing earnings. The Nick Scali share price is down 2.46% at $13.46 at the close on Monday.

Super Retail Group Ltd (ASX: SUL)

Next up is Super Retail Group, which owns popular retail brands like Super Cheap Auto, Macpac, Rebel and BCF.

Super Retail tends to do better than other consumer discretionary companies across economic cycles, as my colleague Sebastian pointed out.

In its May trading update, the company said its like-for-like sales growth was largely flat, with BCF experiencing a 5% decline and Macpac experiencing a 3% growth.

Super Retail Group CEO Anthony Heraghty said that while store foot traffic and transaction volumes continued to grow, the ongoing cost-of-living pressure was impacting a number of items per sale.

But the resilience of the business was insufficient to keep investors excited amid overall consumption weakness.

The Super Retail Group share price has fallen 16.37% year-to-date, putting its valuation at a price-to-earnings ratio of 11.54 times based on FY24 earnings estimates by S&P Capital IQ.

This is cheap compared to its historical trading range of 8 times and 20 times. Excluding the Great Financial Crisis of 2008 and the COVID-19 outbreak in March 2020, the stock has rarely traded below 10x on a forward basis.

At the close of trading, the Super Retail Group share price was trading at $13.28, offering a dividend yield of 5.72%.

Accent Group Ltd (ASX: AX1)

Lastly, let’s talk about shoe seller Accent Group, a company behind well-known brands like The Athlete’s Foot, Platypus Shoes, Hype DC, and Skechers.

In 1H FY24, the company reported a 2.7% growth in its revenue to $811 million, but its operating profits took a bigger hit, falling 20% to $72.4 million.

The company mentioned its cost of doing business increased due to negative like-for-like retail sales, lower wholesale sales and cost inflation.

However, given its extensive store network, this could be reversed if consumers returned to their stores to buy more shoes.

Based on FY25 earnings estimates by S&P Capital IQ, Accent Group shares are trading at a P/E ratio of 14 times.

Dividends are an added bonus. Bell Potter seems to like Accent Group for its dividends. As my colleague James noted, the broker forecasted dividends of 13 cents per share (cps) in FY24 and 14.6 cps in FY25. At the current share price, these represent 6.7% and 7.5%, respectively.

The Accent Group share price closed on Monday down 1.53% at $1.93.

The post 3 ASX retail shares that could benefit from potential interest rate cuts appeared first on The Motley Fool Australia.

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Motley Fool contributor Kate Lee has positions in Nick Scali. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Super Retail Group. The Motley Fool Australia has positions in and has recommended Super Retail Group. The Motley Fool Australia has recommended Accent Group and Nick Scali. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

On Monday, the S&P/ASX 200 Index (ASX: XJO) started the week with a small decline. The benchmark index fell 0.3% to 7,700.3 points.

Will the market be able to bounce back from this on Tuesday? Here are five things to watch:

ASX 200 expected to rebound

The Australian share market is expected to rebound on Tuesday after a strong start to the week on Wall Street. According to the latest SPI futures, the ASX 200 is poised to open the day 30 points or 0.4% higher. On Wall Street, the Dow Jones was up 0.5%, the S&P 500 rose 0.8%, and the Nasdaq charged 0.95% higher.

Clinuvel named as a buy

The Clinuvel Pharmaceuticals Limited (ASX: CUV) share price could be dirt cheap according to analysts at Bell Potter. This morning, the broker has reaffirmed its buy rating and $22.25 price target on the healthcare stock. It said: “We view the first vitiligo Phase 3 readout in CY25 as a significant catalyst for the company and see the current CUV price as a good entry point for those willing to take on clinical risk with downside mitigated to a degree by the existing, profitable EPP franchise.”

Oil prices jump

It could be a very good session for ASX 200 energy shares such as Santos Ltd (ASX: STO) and Karoon Energy Ltd (ASX: KAR) after oil prices jumped overnight. According to Bloomberg, the WTI crude oil price is up 2.6% to US$80.47 a barrel and the Brent crude oil price is up 2.1% to US$84.39 a barrel. Oil prices are rising amid optimism that summer fuel demand will draw down inventories and tighten the market in the third quarter.

Premier Investments goes ex-dividend

Premier Investments Limited (ASX: PMV) shares are going ex-dividend on Tuesday and could trade lower. In March, the Smiggle and Peter Alexander owner released its half year results and reported EBIT of $209.8 million. This allowed the company to increase its interim dividend by 16.7% to a record of 63 cents per share. Eligible shareholders can now look forward to receiving this on 24 July.

Gold price falls

ASX 200 gold miners Evolution Mining Ltd (ASX: EVN) and Regis Resources Limited (ASX: RRL) could have a subdued session on Tuesday after the gold price dropped overnight. According to CNBC, the spot gold price is down 0.6% to US$2,334.9 an ounce. Higher bond yields put pressure on the precious metal.

The post 5 things to watch on the ASX 200 on Tuesday appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Premier Investments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Rising living costs are forcing consumers to tighten their belts.

According to the Australian Bureau of Statistics, spending on discretionary goods and services rose only by 0.6% in April 2024, while non-discretionary spending rose by 5.8%.

Amid this backdrop, it’s not surprising that the automobile dealership sector faces significant challenges. Many potential buyers are delaying vehicle purchases, raising questions about the current value of retail stocks in this industry.

This bleak industry outlook has driven Peter Warren Automotive Holdings Ltd (ASX: PWR) to a five-year low in its share price.

This consumer discretionary stock is trading at a price-to-earnings (P/E) ratio of below 8 times and offers an 11% dividend yield. Is this the right time to buy Peter Warren shares, or is it merely a value trap?

Automotive dealership business

Peter Warren is an automotive dealership group with a rich heritage, having operated in Australia for over 60 years. The company runs 85 franchise operations and represents 27 brands across volume, prestige, and luxury segments.

Peter Warren operates along the eastern seaboard under various banners, including Peter Warren Automotive, Mercedes-Benz North Shore, Macarthur Automotive, Penfold Motor Group, Bathurst Toyota, Volkswagen, and Euro Collision Centre.

Understandably, it is not an easy time to run any consumer discretionary business, let alone auto dealerships.

In 1H FY24, the company reported a 1% growth in its underlying earnings before interest, tax, depreciation, and amortisation (EBITDA). Its underlying profit before tax was down 20% to $34.4 million as the higher interest rates weighed on.

The share price has halved over the past five years, reducing the company’s market value by approximately $300 million.

Profit guidance downgrades

The weak profits and rising debt costs led the company to downgrade its FY24 profit guidance.

As indicated in its May update, the company anticipates an underlying profit before tax of $52 million to $57 million for FY24, which is below market expectations.

The business is hit by weak customer demand and intensifying competition. The company noted:

A significant increase in vehicle supply by OEM’s has led to greater competition between dealerships and lower gross profit margins on new vehicles. The contraction in new vehicle margins has occurred across the industry and is the most acute in brands and models where supply levels and inventory holdings are highest.

The level of customer demand for new vehicles has reduced as a result of cost-of-living pressures.

Are Peter Warren shares cheap enough?

At such a low share price, Peter Warren shares appear undervalued based on many valuation metrics. Using estimates compiled by S&P Capital IQ, Peter Warren shares are currently trading at:

• 8 times FY24 earnings estimates
• 9 times FY25 earnings estimates
• 0.6 times its book value
• fully-franked dividend yield of 11%

However, the higher P/E ratios for FY25 imply analysts’ forecast earnings will continue falling in the coming years.

While it’s difficult to argue that these numbers are expensive, whether they are cheap enough will depend on when the earnings will reach their bottom from here.

Is it time to buy Peter Warren?

Peter Warren shares look cheap using many commonly used valuation metrics, although it is difficult to pinpoint when exactly consumers will return to buy more cars.

The post Is this ASX All Ords retail stock too cheap to ignore? appeared first on The Motley Fool Australia.

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Motley Fool contributor Kate Lee has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

ASX uranium shares, Microsoft Corp (NASDAQ: MSFT) co-founder Bill Gates, and the AI revolution have an energetic thread connecting them.

As you may be aware, the rapid expansion of AI is also driving increased energy demand. The new technology requires the construction of more data centres, which in turn require significantly more electricity to drive the AI-enabled chips.

In a world intent on decarbonising its energy sources, this connects the AI revolution to ASX uranium shares like Paladin Energy Ltd (ASX: PDN), Bannerman Energy Ltd (ASX: BMN), Deep Yellow Limited (ASX: DYL), Boss Energy Ltd (ASX: BOE) and Alligator Energy Ltd (ASX: AGE).

Because data centres need reliable baseload power that can’t always be delivered by solar or wind power, a growing number of operators are investigating the potential of nuclear energy to power the new centres when the sun’s not shining, and the wind’s gone flat.

Which brings us to Microsoft’s Bill Gates.

ASX uranium shares count as ‘allies’

Bill Gates has been investigating the potential of next generation nuclear reactors via his start-up company TerraPower since 2008.

And in potentially good news for ASX uranium shares, Gates told US broadcaster CBS that he’s prepared to invest billions more dollars into the company’s first commercial-scale reactor, located in Wyoming.

“I put in over a billion, and I’ll put in billions more,” Gates said about the project after construction commenced last week.

The new TerraPower nuclear plant was originally planned to start producing power in 2028. That’s been pushed back to 2030 following the US ban on Russian uranium imports. The plant is now expected to come online in 2030.

With Russia’s nuclear fuel “unacceptable now,” Gates said TerraPower would source the radioactive metal domestically and from the nation’s allies. Presumably that could include ASX uranium shares.

Exploding AI demand

In an interview with US-based National Public Radio (NPR), Gates addressed the strains that the “exploding AI demand” could put on the electric grid.

“The additional data centres that we’ll be building look like they’ll be as much as a 10% additional load for electricity,” he said.

Gates added:

The US hasn’t needed much new electricity, but with the rise in a variety of things from electric cars and buses to electric heat pumps to heating homes, demand for electricity is going to go up a lot.

And now these data centres are adding to that. So, the big tech companies are out looking at how they can help facilitate more power, so that these data centres can serve the exploding AI demand.

As for ASX uranium shares, Australia has the world’s largest proven uranium reserves. Enough to sustainably power the AI revolution into the far-distant future.

The post What Bill Gates, ASX uranium shares and the AI revolution have in common appeared first on The Motley Fool Australia.

More reading

• 3 reasons ASX uranium stocks can keep charging higher into 2025
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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Microsoft. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Microsoft. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Shares of semiconductor giant Nvidia (NASDAQ: NVDA) have gained nearly 217% over the last year. Undoubtedly, the rapid advancement and adoption of generative artificial intelligence (AI) applications and large language models have been the key demand drivers for its AI-capable chips and systems. The graphics processing unit (GPU) leader has emerged as both an enabler and a major beneficiary of the ongoing generative AI revolution.

Nvidia posted a strong performance in its fiscal 2025 first quarter, which ended April 28: Revenue and earnings soared year over year by 262% and 690%, respectively. For the fiscal year, which will end Jan. 31, analysts expect its revenue to grow by 97% to $120 billion and earnings per share (EPS) to rise by 109% to $2.71.

Beyond that exceptional short-term outlook, there are also at least three major reasons to expect Nvidia will grow significantly in the long run.

A dominant accelerated computing player

Nvidia’s data center business revenue soared by a jaw-dropping 427% year over year to $22.6 billion in fiscal Q1. That segment accounted for 87% of its revenue, and will play a critical role in the company’s future growth story.

Hyperscalers (large cloud infrastructure providers), enterprises across verticals, and sovereigns worldwide are upgrading trillions of dollars worth of installed data center infrastructure that was built around dumb NIC (network interface cards) and CPUs by installing accelerated computing hardware. This infrastructure has become critical in training and inferencing large language models and other generative AI applications. Nvidia also expects enterprises to upgrade existing accelerated computing infrastructure from that based on current Hopper architecture H100 chips to next-generation Hopper architecture H200 chips and next-generation Blackwell architecture chips.

The economics are highly appealing for clients, especially for cloud service providers. During the most recent earnings call, an Nvidia executive asserted that “for every $1 spent on NVIDIA AI infrastructure, cloud providers have an opportunity to earn $5 in GPU instant hosting revenue over four years.”

Demand for Nvidia’s AI GPUs is far outpacing supply, even though the company has been focusing on expanding production capacity for chips like H100 and Grace Hopper. It expects the supply of next-generation H200 and Blackwell chips will continue to fall short of demand until next year. This will ensure that Nvidia continues to enjoy pricing power, despite the increasing competition in this niche of the chip industry.

Besides its AI GPUs, Nvidia has also introduced the Grace Hopper Superchip (CPU + GPU), Blackwell architecture chips, AI-optimized Spectrum-X Ethernet networking, and Nvidia AI enterprise software. These products help drive performance gains and users’ lower costs while training and running AI applications.

According to Nvidia CEO Jensen Huang, AI is enabling the $3 trillion information technology industry to build tools that can target nearly $100 trillion of industry. Against this backdrop of solid growth, commitment to innovation, and rapidly expanding market opportunities, the company’s forward price-to-earnings (P/E) multiple of 33.93 looks justified, even if it is not cheap.

Full-stack AI platform

Nvidia has evolved from a chip supplier to a “full stack” AI platform provider. The company provides hardware such as GPUs, DPUs (data processing units), and CPUs a complete software stack (CUDA, AI enterprise software, inference microservices, Omniverse), high-speed networking components (InfiniBand, Ethernet), and servers to build “AI factories” that generate multimodal outputs (AI tokens) including text, images, audio, and video. AI factories refer to the essential infrastructure built by clients for AI production. In its fiscal first quarter, Nvidia worked with more than 100 customers to build AI factories that ranged in size from hundreds of GPUs to 100,000 GPUs.

Nvidia’s GPUs and the supporting Compute Unified Device Architecture (CUDA) software stack — an AI-optimized parallel programming platform for the company’s hardware portfolio — have been pivotal in multiple AI breakthroughs, including transformer models, unsupervised learning, and foundational models like GPT-4 and Meta Platforms‘ Llama. In its efforts to stay ahead of the competition, the company has accelerated the release cadence of its products and major features from once every two years to once every year. Nvidia has also built a large ecosystem of partners that includes technology titans, AI start-ups, and every major cloud service provider.

All these factors have enabled Nvidia to build a solid competitive moat in the burgeoning AI space.

Expanding addressable market

Nvidia is also leveraging its AI platform to expand its addressable market in areas such as “sovereign AI,” the automotive industry, and physical AI.

Nvidia sees sovereign AI as a major growth opportunity since countries worldwide are building out their domestic AI capabilities. The company partners with governments and local players to provide end-to-end AI infrastructure. Management expects sovereign AI’s contribution to Nvidia’s revenue to grow from nothing in fiscal 2024 to a figure in the high-single-digit billions in fiscal 2025.

Nvidia’s Drive platform, which integrates hardware and software solutions to provide computing power, AI technologies, and software frameworks for autonomous vehicles and advanced driver-assistance systems, is also seeing robust demand.

Nvidia also expects physical AI — i.e., AI-enabled robots — to be a major long-term growth driver. The company is creating end-to-end robotics platforms for factories and warehouses as well as humanoid robots.

Although Nvidia’s share price is near its all-time high, the growth drivers discussed above should provide a strong enough case to convince investors to pick up shares of this blockbuster stock now. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 3 reasons to buy Nvidia like there’s no tomorrow (Hint: The stock split Isn’t 1 of them) appeared first on The Motley Fool Australia.

More reading

• 5 Reasons Nvidia isn’t in an AI-fueled bubble
• 2 reasons to buy Nvidia after the stock split (and 1 reason to sell)
• With nothing in my savings account, I’d use Warren Buffett’s golden rule to build wealth
• Nvidia stock is still a great buy — but when should investors sell shares?
• Prediction: This will be Nvidia’s next big move

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Meta Platforms and Nvidia. The Motley Fool Australia has recommended Meta Platforms and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The stock market has a long history of creating bubbles, particularly in the technology sector. However, when it comes to Nvidia (NASDAQ: NVDA), the chip maker’s eye-popping valuation may not actually be signs of a bubble. Rather, it might reflect a deeper truth about the rapidly evolving state of artificial intelligence (AI).

Nvidia’s shares are currently trading at 77.1 times trailing earnings, a lofty valuation by historical standards and rich even for the high-growth tech sector. This has led some investors to question whether it’s time to take profits on Nvidia stock. After all, the chipmaker’s shares are up by a staggering 206% over the prior 12 months.

However, several lines of evidence suggest that Nvidia’s growth story is still in the early innings and that AI is on track to fundamentally alter the world. Here is a look at five key tailwinds that should power Nvidia’s shares even higher over the next several years.

Five key themes

First, the general population remains largely unaware of the true power of AI. This situation is set to change dramatically later this year as Apple integrates AI into its ecosystem and Amazon strives to make Alexa smarter with AI.

As a broad base of consumers begin to experience the benefits of AI in their daily lives, demand for AI-powered products and services will likely skyrocket, driving substantial revenue growth for companies like Nvidia that provide the architecture behind the technology.

Second, the pace of AI development is accelerating. The exponential growth of computing power has put humanity on the doorstep of a series of “Gutenberg moments”, or events that completely upend the status quo.

This quickening pace of innovation implies that rivals probably won’t have time to challenge Nvidia’s dominant position in the AI-capable graphics processing unit (GPU) space. While competitors like Advanced Micro Devices and Intel are aiming to cut into Nvidia’s dominant market share, the window of opportunity is closing.

Third, the AI arms race between leading American firms, and the U.S. and China more broadly, won’t allow developers time to create alternative ecosystems.

The race to achieve artificial general intelligence (AGI) is on, and Nvidia’s superchips like Blackwell will likely be the primary drivers of this transformation. As companies and nations scramble to gain a competitive edge in AI, Nvidia’s technology will remain in high demand.

Fourth, the advent of AI won’t follow any rules established by prior transformational technologies like the internet or cars. AI can potentially alter human society at a fundamental level, and it will happen in less than five years.

Traditional valuation metrics and historical precedents, in turn, may not wholly apply to groundbreaking companies like Nvidia.

Fifth, the potential applications of AI are virtually limitless, spanning across industries such as healthcare, finance, transportation, and more. As AI becomes more sophisticated and ubiquitous, it will create entirely new markets – many of which are unimaginable today.

Nvidia, with its cutting-edge AI technology and growing customer base, is in the catbird seat.

Key takeaways

Nvidia’s current valuation may seem high by historical standards. But it’s important to consider the company’s unique position in the rapidly evolving AI landscape.

With the general population largely unaware of AI’s already incredible capabilities, the quickening pace of development, and an ongoing arms race, Nvidia should continue to post record-breaking revenue growth in the coming years.

After all, Nvidia’s potential is truly unprecedented as the gatekeeper to a $100 trillion AI-based economy. Viewed in this context, the growing bubble talk around the chip maker’s shares seems unjustified. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 5 Reasons Nvidia isn’t in an AI-fueled bubble appeared first on The Motley Fool Australia.

More reading

• 2 reasons to buy Nvidia after the stock split (and 1 reason to sell)
• With nothing in my savings account, I’d use Warren Buffett’s golden rule to build wealth
• Nvidia stock is still a great buy — but when should investors sell shares?
• Prediction: This will be Nvidia’s next big move
• Is Nvidia stock a buy after the 10-for-1 stock split?

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. George Budwell has positions in Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Amazon, Apple, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Intel and has recommended the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool Australia has recommended Advanced Micro Devices, Amazon, Apple, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.