1) I'm far from alone with my skepticism on Nvidia (NVDA) recently...
One of my favorite bloggers, Creative Planning's Charlie Bilello, is also cautious on NVDA shares, given their rich valuation and the company's enormous market cap.
This data he compiled of the recent market-cap-per-employee of Nvidia compared to other leading companies floored me... I would have guessed 2 times that of Netflix (NFLX) and Apple (AAPL), not 4 times. Here's a post on X Bilello shared last week of the breakdown:
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And in the latest edition of his excellent Week in Charts blog yesterday, Bilello also showed that Nvidia's revenue growth rate is decelerating:
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In this next chart, he also showed that Nvidia's stock price has exceeded revenue growth by a wide margin the past two years, five of the past six years, and 10 of the last 12 years:
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Lastly, as Bilello showed in this next chart, Nvidia's margins ticked down a bit last quarter – the first decline in two years:
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To be sure, Nvidia is a great company with a bright future...
But given its size – more than $120 billion in run-rate annual revenue and a $2.6 trillion market cap (even after yesterday's big drop) – and valuation – more than 22 times run-rate revenue (not earnings) – it would take unprecedented (and unlikely) performance for the stock to be a good investment at these levels.
As I said in Thursday's e-mail, "this is the kind of stock I like to pound the table on when it's down at least 50% (if not 75%)."
