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Is It Time To Short Nvidia?


Peer group analysis is provided.

Nvidia expects to capitalize on two promising markets.

To short or not to short?

Nvidia (NASDAQ:NVDA) reported new record quarterly results (revenues up 9% sequentially and GAAP EPS of $0.4), which easily topped analysts' estimates. The company is a growing machine, positioned on two promising segments (Datacenter and Automotive). On top of that, Nvidia is the market leader in the GPU business for gaming and its new GPU GTX 1080/1070 already appears highly successful. The company's share price skyrocketed 95% YTD. Everything seems to go in the right direction - revenues up quarter over quarter, record EPS, high growth opportunities, few competitors, and the list goes on. However, is it time to short Nvidia?

Valuation and Peer Analysis

Over the last year, investors have rewarded Nvidia for its growth story. The share price was at $23.39 one August 17th 2015. One year later, it stands at $63.04, over 100% gains (plus dividends). In the current market, growth stories are always appreciated by investors to the point of overvaluation. This is what I point out with my peer group analysis.

The company closest competitors are AMD (NASDAQ:AMD) and Intel (NASDAQ:INTC) as everybody knows. However, I add a range of other tech companies to give more weight to my peer group analysis. As you can see in the below table, Nvidia has an EV/EBITDA multiple of 25.42 (third higher), which shows that the company has a rich valuation in comparison with a peer group median of 15.62. I consider the peer group already a little overvalued with the median EV/EBITDA multiple above 15. From an...