Nvidia Corporation (NASDAQ:NVDA) has been among an elite class of high-flying tech stocks. Over the past five years, NVDA stock has delivered a return of over 1,400%.
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So far in 2021 – a year that has not been kind to many other tech stocks – NVDA is up 32%. Its business is red-hot, with gaming, data centers, AI and crypto currency mining all driving revenue growth. That performance has meant that shares are expensive. The company wants to make those shares (now trading near the $700 level) more accessible. A four-for-one stock split was just approved.
The split goes into effect starting at the opening of trading on July 20. At that point shares that are currently going for around $700 would be worth about $175 each. Of course that assumes that NVDA stock will sit still between now and then, which it almost certainly will not. Not with this stock’s growth trajectory. Not to mention the fact that the company just launched new, upgraded RTX 3070 Ti and RTX 3080 Ti graphics cards.
NVDA Stock Sets First Quarter Records
Why is NVDA stock performing so well in 2021 when other high-profile tech stocks have stumbled? Look no further than the company’s Q1 fiscal 2022 results, which were released on May 26.
Revenue was a record $5.66 billion, up 84% year-over-year. Gaming division revenue was a record $2.76 billion (up 106% YoY) on the strength of RTX 3000 series graphics cards released last fall. The cards are still almost impossible to find in stock at retailers. Data center revenue (which includes AI) set another record at $2.05 billion – up 79% YoY. Adjusted EPS of $3.66 beat Wall Street estimates of $3.28 and were up 103% compared to the previous year.
The company also issued Q2 guidance for revenue of $6.3 billion, plus or minus 2%.
NVDA stock is up 10% in the two weeks since those impressive results.
Stock Split Announced and Approved
Besides the record financial performance, Nvidia had other big news for investors in May.
The company proposed a four-for-one stock split, aiming to make shares more accessible to both investors and employees.
That plan was approved by Nvidia stockholders on June 3. Shareholders of record as of June 21 will each receive three additional shares of NVDA stock after the market closes on July 19.
Bottom Line on NVDA Stock
Whether you buy now, or wait for the individual share price to become more affordable post-stock split, an investment in Nvidia is very likely to deliver long-term growth.
There are some risks inherent in this Portfolio Grader “B” rated stock. For one thing, we all know that cryptocurrency can be extremely volatile. When cryptocurrencies tank, people stop buying graphics cards for crypto mining. Investors still grimace at the beating NVDA stock took in late 2018 when that exact scenario happened. Nvidia shares lost nearly half their value in just two months.
That being said, Nvidia is managing the crypto mining aspect of its business more closely this time around. A loss of revenue should miners hit pause would be painful, but the company is unlikely to end up with a glut of unsold graphics cards as a result, as it did in 2018. And Nvidia’s other lines of business, including gaming, data centers, and AI are on fire, so that will help to reduce the sting should crypto falter. Another risk we’re becoming all-too aware of in 2021 is a global shortage of semiconductors – Nvidia is not immune.
The biggest question for prospective NVDA stock investors is whether to buy now. Shares will be more affordable on July 20, but investors who drop $700-ish on NVDA now will not be punished in any way for doing so. And by the time July 20 rolls around, those newly split shares are probably going to be worth significantly more than $175 each. So if NVDA is on your list and you’re not overly concerned about crypto crashes or chip shortages, now is probably a smart time to make a move.
On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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