To The Moon

$NVIDIA(NVDA)$ 's P/E is close to the lowest in 10 years!

Bernstein's star analyst Stacy Rasgon spoke out against the trend and strongly supported Nvidia's investment value. Bernstein gave a target price of $185.

In his view, the current stock price correction has compressed Nvidia's valuation to the "golden hitting zone", and investors are facing a rare layout window.

Will you follow to add position on $NVIDIA(NVDA)$ ?

Let's take a look at a data chart first:

The figure below shows the P/E data of $S&P 500(.SPX)$ , $NASDAQ 100(NDX)$ and MAG 7 stocks.

From the perspective of Forward P/E (Fwd P/E), MAG 7 from low to high are $Alphabet(GOOG)$ , $NVIDIA(NVDA)$ , $Meta Platforms, Inc.(META)$ , $Microsoft(MSFT)$ , $Amazon.com(AMZN)$ , $Apple(AAPL)$ and $Tesla Motors(TSLA)$ .

The question is, what do the TTM P/E and Fwd P/E in the above figure reflect, and what do they indicate?

TTM P/E (rolling P/E) and Forward P/E (forward P/E) are two different P/E calculation methods, the main differences are as follows:

Summary

TTM P/E is based on actual data from the past 12 months, and focuses more on the company's current profitability, so the data is more reliable; while Forward P/E is based on future earnings forecasts, and focuses more on the company's growth potential and market expectations, but there is uncertainty. Investors can choose a suitable P/E indicator based on the company's characteristics and investment goals.

Interpretation of low Forward P/E:

• It may mean that the company is undervalued: A low forward P/E ratio may indicate that the market's future expectations for the company are more conservative, but the company may actually have good growth potential.

• High investment cost-effectiveness: If the company's future earnings expectations can be realized, a low forward P/E ratio may mean that investors can buy stocks at a lower price, and the future earnings potential is greater.

• Reflecting the pessimism of market expectations: A low forward P/E ratio may also be due to the market's lack of confidence in the company's future profitability, or a poor industry outlook.

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Now that we understand the role of this P/E value, let's take a closer look at the specific data of the market index and MAG7.

What does it indicate when the forward P/E ratio is significantly lower than the five-year average?

A P/E ratio below the five-year average typically suggests that the current stock price is relatively low compared to its historical levels. This could be due to reduced market expectations for the company's future growth or a generally more pessimistic market sentiment. However, it could also present a buying opportunity for investors, especially if the company's fundamentals remain strong.

• $Tesla Motors(TSLA)$ has a P/E ratio of 129.67, significantly lower than its five-year average P/E ratio of 300.70, which is a 57% decrease. Despite this, Tesla's total return over one year is 51.3%, the three-year annualized total return is 0.58%, and the five-year annualized total return is 41.7%. These figures indicate that, despite the decrease in P/E ratio, Tesla's stock performance remains strong, demonstrating market confidence in its long-term growth potential.

• $Amazon.com(AMZN)$ has a P/E ratio of 36.44, which is below its five-year average P/E ratio of 70.86, marking a 49% decrease. Amazon's total return over one year is 15.5%, the three-year annualized total return is 11.50%, and the five-year annualized total return is 16.5%. The decrease in Amazon's P/E ratio may reflect market concerns about a slowdown in its growth rate, but its stable return rate indicates that it remains a viable investment option.

• $NVIDIA(NVDA)$ has a P/E ratio of 38.78, below its five-year average P/E ratio of 59.89, a 35% decrease. NVIDIA's total return over one year is 33.9%, the three-year annualized total return is 68.80%, and the five-year annualized total return is 76.6%. NVIDIA's high return rate indicates its leading position in the fields of graphics processing and artificial intelligence, and the decrease in P/E ratio could be an opportunity to buy.

• $Alphabet(GOOGL)$ has a P/E ratio of 21.08, below its five-year average P/E ratio of 25.48, a 17% decrease. Google's total return over one year is 25.7%, the three-year annualized total return is 7.70%, and the five-year annualized total return is 20.1%. As a leader in internet search and advertising, Google's decrease in P/E ratio may be due to a reassessment of its growth potential by the market, but its stable return rate indicates that it remains a solid investment choice.

• $Microsoft(MSFT)$ has a P/E ratio of 31.17, slightly below its five-year average P/E ratio of 33.99, a decrease of 8%. Microsoft's total return over one year is -5.6%, the three-year annualized total return is 10.40%, and the five-year annualized total return is 19.8%. The decrease in Microsoft's P/E ratio may be due to market concerns about its growth rate, but its stable return rate indicates that it remains a consideration for investment.

Furthermore, investors should also pay attention to the P/E ratios of the $S&P 500(.SPX)$ and the $NASDAQ 100(NDX)$, which are above their five-year averages, possibly reflecting market optimism about overall economic growth.

When making investment decisions, investors should remain cautious, avoid blindly following trends, and choose investment targets based on comprehensive analysis and personal investment objectives.

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