Once dubbed ‘The smartest company in the world’ by the MIT Technology Review, Nvidia Corp.’s (NVDA-Q) recent blow-out earnings report helped it to live up to the name. But is it too late to buy the stock?
It is important to note that Nvidia stock’s 24 per cent surge Thursday was the result of actual financial results, not speculation. The chipmaker’s quarterly earnings report featured profits 19 per cent ahead of consensus estimates.
More importantly, management raised second quarter revenue guidance by US$4-billion to US$11-billion, thanks to an ongoing avalanche of artificial intelligence-related spending. The new sales forecast implies earnings of over US$2 per share, double previous analyst expectations.
BofA Securities analyst Vivek Arya was among the raft of analysts that jacked up the target price after the earnings announcement. Mr. Arya pushed his 12-month target to US$450 from US$340.
Stifel Financial’s Ruben Roy also raised his price target on Nvidia, from US$300 to US$370, but warned clients about valuation at the same time. Mr. Roy emphasized that the stock is now trading at 42.5 times fiscal year 2024 earnings, which is above the long-term average of 42.0.
Nvidia stock is clearly not cheap. It’s also true that the market hype surrounding artificial intelligence will fade, whether next month or five years from now. For the short term, however, the valuation premium seems easily bearable for a company at the centre of a new technology revolution.
-- Scott Barlow, Globe and Mail market strategist
Also see: Investing in AI: how to avoid the hype and find the best opportunities
This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you or you’re reading this on the web, you can sign up for the newsletter and others on our newsletter signup page.
Short sales on the TSX: What bearish investors are betting against
Home Capital Group is again under attack by former U.S. hedge-fund manger and noted short seller Marc Cohodes, even though the mortgage lender is in the final stages of a takeover bid by Smith Financial Corp. Meanwhile, Shopify is also back in short sellers’ sights again. Larry MacDonald takes a look at the latest bets against Canadian stocks.
TSX seen up but slowdown in China could crimp gains: poll
Canada’s main stock index will rally less than previously expected in 2023 as higher borrowing costs cool the domestic economy and signs China’s recovery is slowing reduce prospects for its resource shares, a Reuters poll found. Here’s what the median prediction of 22 portfolio managers and strategists is predicting for this year and next.
What happened to market volatility?
In 2022, market volatility made a comeback as what central bankers called transitory inflation proved to be anything but. The market lurched and gyrated, and volatility soared. Then Jan. 1 of this year came, and it was like someone flipped the proverbial switch. Volatility collapsed. But it’s not like there hasn’t been plenty to worry about, between the U.S. government debt-ceiling concerns, a U.S. regional banking crisis, a tightening of financial conditions, geopolitical rumblings, and an earnings recession. What’s behind the market’s seemingly relaxed state? Portfolio manager Hans Albrecht has an answer.
Also see: Wall Street prepares for Treasuries mess as default looms
International expansion - or lack thereof - key to picking Canadian bank stock winners: Veritas
The long-term winners among Canadian banks will be stay-at-home institutions that shy away from international expansion, according to analysts at Veritas Investment Research in Toronto. Their argument, laid out in a recent report, offers a counterblast to the conventional wisdom that insists foreign acquisitions are the only way for Canadian banks to achieve significant growth. Ian McGugan tells us more.
Also see: Big bank earnings wrap up as results disappoint and interest rates, recessionary fears bite
It’s not worth paying high management fees for highly diversified portfolios
Highly diversified portfolios rarely outperform their benchmarks. However, a highly concentrated portfolio can add substantial value. Veteran fund manager Vito Maida crunched the numbers to prove it.
Sanctioned China stocks win sudden boost from patriotic buyers
The trademark Chinese patriotism is back at play in markets. As Japan and the United States place fresh curbs on Chinese technology firms, local investors are scooping up shares of those firms and state companies, and reaping handsome rewards, as Reuters reports.
Others (for subscribers)
The highest-yielding stocks on the TSX, plus risk data
Number Cruncher: 5 dividend-paying lithium stocks
Number Cruncher: 16 mutual funds run by top-rated teams
Friday’s analyst upgrades and downgrades
Thursday’s analyst upgrades and downgrades
Thursday’s Insider Report: These three dividend stocks have seen recent million-dollar purchases
Why this portfolio manager is buying utilities on ‘strong dividends’ and selling big energy
Are you a financial advisor? Register for Globe Advisor (www.globeadvisor.com) for free daily and weekly newsletters, in-depth industry coverage and analysis.
Ask Globe Investor
Question: Why does John Heinzl focus on the percentage increase in dividends? A company increasing its dividend yield from 0.1 per cent to 0.2 per cent is credited with a 100-per-cent increase. However, this is quite small in absolute terms. I would much prefer a company that increases its dividend yield from 4 per cent to 4.4 per cent, which is only a 10-per-cent increase but actually much more substantial. Surely there must be a better metric?
Answer: I don’t recall ever saying that I look at percentage dividend growth in isolation. Rather, as I said in a recent column, “As a dividend growth investor, I aim to get the best of both worlds: an above-average yield, and a high dividend growth rate.”
Like you, I have little interest in a stock that doubles its yield from a minuscule 0.1 per cent to a slightly less minuscule 0.2 per cent. Because my primary goal is to increase my investment income (and, of course, benefit from capital gains that often go hand-in-hand with that), I focus on stocks with higher yields that hike their payouts regularly.
This month alone, I’ve received dividend increases from five companies in my model Yield Hog Dividend Growth Portfolio – namely, Royal Bank (RY), Canadian Imperial Bank of Commerce (CM), Bank of Montreal (BMO), Telus Corp. (T) and CT Real Estate Investment Trust (CRT.UN). The average increase was about 3 per cent.
That may not seem like much, but because all of these companies have relatively high dividend yields – averaging about 5.4 per cent – the increase in my dollar income will be more substantial than if I owned stocks with tiny yields that grew at a faster rate.
To really appreciate the power of a high yield combined with consistent dividend growth, however, you need to look at a portfolio of stocks over a multi-year period. When I started my model dividend portfolio with $100,000 of virtual “cash” on Oct. 1, 2017, it was generating annual income of $4,094. Now, thanks to dozens of dividend increases and regular reinvestment of my dividends, the portfolio is throwing off $7,050 of cash annually – an increase of about 72 per cent. (View the complete portfolio online at tgam.ca/dividendportfolio.)
And that income will only continue to grow.
--John Heinzl (E-mail your questions to firstname.lastname@example.org)
What’s up in the days ahead
What can investors do to protect themselves in the event a U.S. debt-ceiling deal isn’t reached? Not much. Our Ian McGugan will explain that the real danger here isn’t the debt, it’s American politics – and that’s something that isn’t going to go away.
Push and pull: World market themes for the week ahead
Click here to see the Globe Investor earnings and economic news calendar.
More Globe Investor coverage
For more Globe Investor stories, follow us on Twitter @globeinvestor
Compiled by Globe Investor Staff