Nvidia (NASDAQ: NVDA) regularly ranks among the most popular shares with ISA investors. Perhaps that’s not a surprise, as this growth stock has a marvellous track record of making people wealthier. It’s up 1,370% in five years and 30% in the past month!
Understandably, many investors might assume that they’re too late to the party when it comes to Nvidia shares. Here are five reasons why I think they’re still worth considering.
Top-tier leadership
The first relates to Jensen Huang, the visionary founder/CEO of Nvidia. We wouldn’t be discussing the company in relation to market-leading artificial intelligence (AI) chips if it wasn’t for him.
Huang anticipated the potential of GPUs beyond gaming, pushing Nvidia towards AI computing and data centres long before competitors. Right now, he’s positioning the company to capture massive future growth market opportunities in humanoid robots, AI-powered healthcare, robotaxis, and quantum supercomputing.
With Huang at the helm, Nvidia’s unlikely to lift its foot off the innovation accelerator.
Strong projected growth
The second reason is that the firm’s growth projections are still very strong. Nvidia’s revenue is expected to top $200bn this financial year, which would represent around 53% growth. Earnings per share (EPS) are anticipated to increase 38%.
By 2028, revenue’s tipped to exceed $300bn. For context, it was less than $11bn in 2019!
Of course, there’s always a chance the company misses these targets. Nvidia has reportedly lost nearly half of its market share in China in the past few weeks due to new export controls. If these restrictions inadvertently strengthen Chinese AI chip firms, then Nvidia may see a lot more international competition (at least outside the US).
As things stand though, Nvidia’s AI products are the gold standard. And the company’s strong growth prospects reflect this fact.
Reasonable valuation
Naturally, Nvidia’s growth will eventually moderate. At that point, it could become a victim of its own success, with investors moving on to the next high-growth story.
This is why it’s important to make sure the valuation isn’t ridiculous. Going on the EPS figures for the next financial year, the stock’s forward price-to-earnings ratio is 23.8.
For a top-class tech firm still growing rapidly, I don’t consider that to be overly expensive. In fact, the stock may well prove to be undervalued.
Price target
Next, the consensus price target among analysts is noticeably higher than the current share price of $132. Right now, it stands at $161, which is almost 22% higher. While there’s no guarantee it will hit this target in the next 12 months, it shows that brokers are bullish. In fact, 63 from 71 analysts currently rate the stock a Buy or Strong Buy.
Massive market
Finally, as already alluded to, Nvidia appears to have significant growth opportunities ahead. Huang’s predicting that humanoid robots will become as ubiquitous as cars over the next couple of decades, making this the next multitrillion-dollar industry.
The company has introduced the Isaac GR00T platform, a general-purpose AI model designed to equip humanoid robots with reasoning and skills necessary for complex tasks. It aims to accelerate the development of bots across various industries.
With the company’s growth prospects undimmed and the stock reasonably priced, I think Nvidia’s worth considering for an ISA.
