Nvidia’ Stock Price Has Nearly Tripled In The Last 3 Years- Here’s Why!

by Trefis Team
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Nvidia’s (NASDAQ: NVDA) stock price grew almost 190% from $98 in March 2017 to $284 in March 2020 primarily due to a significant jump in the P/E multiple. A growth in revenue and net margins also helped, although stock price gains were partly offset by a slight increase in share count.

In our interactive dashboard, What Factors Drove The 190% Growth In Nvidia’s Stock Over The Last 3 Years?, we break down the factors behind this move.

(A) Nvidia’s Total Revenue has grown 58% from $6.91 billion in 2017 to $10.92 billion in 2020

  • Nvidia’s total revenue grew from $6.91 billion in 2017 to $11.72 billion in 2019, primarily driven by a growth of around $4 billion in GPU revenue.
  • However, revenue dropped to $10.92 billion in 2020, amidst dropping PC and notebook sales and a slowdown in the Chinese economy.
  • GPU Revenue dropped to $9.46 billion in 2020, but is still up more than 50% since 2017.
  • Tegra Products revenue grew from $0.82 billion in 2017 to $1.54 billion in 2019, before dropping to $1.45 billion in 2020.

(B) Net Income margins increased from 24.1% in 2017 to 25.6% in 2020, but net income grew from $1.67 billion to $2.8 billion, driven by a significant jump in revenue

  • A sharp rise in 2018 and 2019 was driven by tax benefits, alongside an overall drop across all expense heads.
  • Nvidia’s net income grew from $1.67 billion in 2017 to $4.14 billion in 2019, due to higher revenues and elevated margins.
  • Net income margin increased from 24.1% in 2017 to 35.3% in 2019.
  • This was followed by a drop to 25.6% in 2020, which led to a drop in net income to $2.8 billion.
  • Share count grew 12.6% from 2017 to 2020, but a rise in net income has helped offset this, driving EPS from $3.08 in 2017 to $4.59 in 2020.
  • The EPS spiked to $5.09 in 2018 and $6.81 in 2019 despite a growth in outstanding share count.
  • This was largely due to a drop in COGS and the effective tax rate.

(C) Price-To-Earnings (P/E) multiple expanded substantially

  • Nvidia’s P/E multiple has been volatile over the years but has grown 94% from 31.9x in 2017 to 61.9x in 2020.
  • The current P/E is also higher than Intel, but lower than that of AMD.

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