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Nvidia is on February 26th 2025 that has a lot of investors asking if they should buy Nvidia stock before it announces those results I'll answer that question in this video to be sure there's a lot to talk about when evaluating that decision Additionally you want to know what my intrinsic value per share is for Nvidia stock I'll reveal that in this video as well I'll also go into discussion about the revelations from China's deep seek company and the lower cost large language model they built and how that could impact Nvidia going forward there was also a lot of information that came out from large tech companies like Amazon and Microsoft and meta platforms that has huge implications for NVIDIA I'll talk about that as well in this video we'll do all that and answer the question if you you should buy before or after earnings in this brief video okay so let's start with nvidia's outlook for the quarter when they report results this is what management told investors that they were going to report this is what Nvidia said roughly 3 months ago they said that in the fourth quarter their revenue is expected to be $37.5 billion and the gross profit margin is expected to be about 73% now if you compare that with the fourth quarter of last year they generated revenue of $ 22.1 billion and a gross margin of 76% that revenue of $22 billion was a year-over-year increase of 265 per.
that's when Nvidia was growing the most in a year-over-year growth rate as a result of the rising demand for its AI products that growth rate has slowed down considerably and it when you think about it 22 billion compared with 37.5 billion that's less than 100% growth now that's remarkable growth to be sure for a company the size of Nvidia that's almost unprecedented but it's still slower than what they were reporting a year ago and four quarter 3/4s ago Etc their growth rate is slowing down and that has some investors concerned also the gross margin 73% compared to 76% in the same quarter last year this was also an increase the 76% margin was up from 63% in the same quarter last year so for all of last year nvidia's Revenue was growing by over 100% closer to 200% and its gross profit margins and operating margins were expanding rapidly fast forward to this upcoming quarter and the rate of Revenue growth is slowing down and the gross profit margin is decreasing the reason for the gross profit margin decreasing is because Nvidia is launching the Next Generation Blackwell technology and management said initially the margins on that product will be lower and then as they ramp it up the margins will recover back to those higher levels at Mid 70 percentage points so that's the forecast that's what management told investors to expect in the upcoming quarter but a lot has happened since management made this forecast most notably the revelations from China's deep seek and how they developed a large language model for a much lower cost than companies like Google and chat GPT did or Google and open AI did with their large language models and then there was a concern that because deep seek was able to do that at such a low cost that the other companies nvidia's primary customers would lower spending as a result of that Revelation but the good news is that doesn't look like it's going to be the case I reviewed all of the the big tech companies earnings including they all said that they're actually increasing their Capital expender budgets on AI Google said they're going to spend $75 billion on AI and that was about a 50% increase from the year before where they spent roughly $50 billion meta platforms similarly said they're going to spend about $65 billion this year that was up from $39 billion in the same time last year Microsoft said that they're going to spend $8 billion or I'm sorry $94 billion and that was up from last year where they spent roughly $50 billion and finally Amazon said it was going to spend close to $15 billion and that was up from around $75 billion the year before so the big major tech companies that are the biggest customers of Nvidia have all announced that they will be spending a lot more money on AI this year compared to last year so it's a double benefit for NVIDIA not only are they not decreasing their budget but in fact they're increasing their budgets significantly and that's great news for NVIDIA and Nvidia stock investors that bolds well not only for nvidia's current quarter but usually every quarter when Nvidia reports its results it tells you what it did in the current quarter and it gives you a forecast for the next quarter so these numbers here from the large tech companies are good news for nvidia's current quarter and for the forecast for the next quarter and if you've been paying attention to the earning season and how it works is when a company reports earnings and the forecast they both need to be good for the company's share price to rise if the company reports good earnings that beat expectations but they report a forecast that's below expectations the stock price tends to fall if the company beats earnings and gives expectations and forecasts that's better than what analysts expected that creates an increase in the share price the segment that everyone will be watching for NVIDIA is the data center segment that's the area where those large tech companies are spending on their AI Ambitions and nvidia's data center Revenue was up 112 % in the most recent quarter and cloud service providers represented 50% of their customers and the remainder was represented by consumer internet and Enterprise companies the largest ones I just told you said they're going to increase their budgets significantly not just by a little bit significantly 30 40 50% more this year compared to last year and that's going to result in tens of billions of dollars more spending in a category where Nvidia has an estimated 80 to 90% market share that bodess well also nvidia's Hopper is still selling strong and its upcoming Blackwell technology are sold out right they're sold out for at least several quarters this year investors are going to want to hear more about this for beyond the next two quarters how does demand look like over the next four to 6 to 8 quarters are they still selling out longer term or or has that demand decreased as Supply increased and are they in better balance that's a big question investors are going to want to hear more about the demand side of the equation and they're also going to want to hear from Nvidia about what they're doing to increase Supply so that they can meet this demand while it's there they don't want to miss out on this demand potentially tens of billions of dollars in Revenue so Nvidia 4 right now and just looking at the forward price to earnings you can come to the conclusion that Nvidia stock is a great value you rarely see a business that's growing at the rate that Nvidia is growing selling at a forward price to earnings this low and the reason why investors can get Nvidia stock at this low valuation is because the company's earnings per share have increased by so much so quickly that the market is a little bit skeptical of the Persistence of these earnings the market is a little bit concerned that maybe after this year nvidia's earnings and sales will fall off a cliff and that would create a situation where you're buying a business at the very very Peak valuation right before it falls off a clip and so that's what a lot of Market participants are concerned about with Nvidia now I recently updated my Nvidia discounted cash flow valuation and my intrinsic value per share came to $120 compared to the current market price of $134 when iount when I account for my margin of safety this would suggest that Nvidia stock is fairly valued according to this metric but according to the forward PE I think it's incredibly undervalued so in combination when I look at the valuation of Nvidia I think it undervalued and I think it's an excellent business so whenever you can get an excellent business even at a fair price I think it's a good deal but if you can get an excellent business at an undervalued valuation I think that's a great deal which is what I think investors get with Nvidia that's why I've had Nvidia rated as one of my top nine stocks to buy in 2025 I last updated that recommendation yesterday on February 9th I still think Nvidia is one of the top stocks one of the top nine stocks to buy right now to the question of should you buy before earnings or after earnings let me preface that by saying earnings are usually a volatile event for a stock the price moves in the days following the earnings release at a much larger percentage than is usually the case on any other day save for special big announcement days so prepare yourself for added volatility in the days after the earnings release to answer if you should buy before I usually use the measuring stick of where is the most risk is it the risk of missing out on a big increase or is it the risk of missing the big downside and in this case I think it's relatively equal the risks to the upside and the downside for Nvidia stock there's a lot that Nvidia can say that will send the stock price soaring and there's a lot that Nvidia can save that'll send the stock price crashing however if I was to put them on a scale I would say the risk is more in favor of upside I would say the risk is more in favor of Nvidia stock Rising after the earnings release given all of the information I've digested from nvidia's biggest customers so I would say if you're thinking about let's say a $100 purchase of Nvidia stock you can do $75 before earnings release and $25 after earnings release if you want to be safer and more risk averse you can do $50 before earnings and $50 after earnings in any case I think Nvidia is an excellent business and is trading for a relatively cheap price at current valuation
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