Nvidia Stock Split Incoming? History Says Yes

Nvidia Corporation (NVDA) has been a powerhouse in the semiconductor industry, consistently leading the market with its cutting-edge technology in graphics processing units (GPUs). Investors are always keenly interested in the company’s financial moves, particularly stock splits, which can significantly affect stock performance and investment strategies. With Nvidia’s stock price soaring, the question on everyone’s mind is: "Is an Nvidia stock split incoming?" History suggests the answer might be yes. This article delves into the history of Nvidia's incoming Q1 earnings, stock splits, analyzes market trends, and explores what investors can anticipate.

Nvidia' s Q1 Earnings Preview

Analysts expect Nvidia to report earnings of $4.64 per share for the fourth quarter of fiscal 2024, a sharp increase from year-ago earnings of $0.88 per share. The company is projected to post revenue of $20.62 billion for the fourth quarter of fiscal 2024, compared to $6.05 billion in the year-earlier quarter. For the first quarter of fiscal 2025, Nvidia has forecasted revenue of $24.0 billion, plus or minus 2%.

Segment Performance

Data center revenue is expected to be a significant driver, with a forecast of $18.4 billion for the fourth quarter of fiscal 2024, marking a 409% increase year-over-year. This segment has been the largest by revenue share and continues to grow as firms expand their AI offerings. Gaming revenue is projected to be $2.9 billion for the fourth quarter of fiscal 2024, up 56% year-over-year. Revenue from the professional visualization segment is expected to be $463 million, up 105% year-over-year. In contrast, automotive revenue is forecasted to be $281 million, showing a slight decline of 4% year-over-year.

Guidance and Market Sentiment

For the first quarter of fiscal 2025, Nvidia expects revenue to be around $24.0 billion, plus or minus 2%, which is above the Street consensus estimate of $22.16 billion. The company also anticipates its first-quarter non-GAAP gross margins to be around 77.0%. Analysts have been optimistic, with several raising their price targets ahead of the earnings release. For example, Susquehanna analyst Christopher Rolland increased the price target to $850 from $625.

Market Impact

Nvidia's stock has gained more than 30% so far this year, reflecting strong investor confidence in the company's AI-driven growth. The stock is up 40.25% year-to-date, outperforming major ETFs such as the SPDR S&P 500 ETF Trust and the Invesco QQQ Trust.

Nvidia Stock Split History

At its current stock price of $950, Nvidia is significantly above the levels at which it has previously executed stock splits. Historically, Nvidia has split its stock several times: a 4-for-1 split on July 20, 2021; a 3-for-2 split on September 11, 2007; a 2-for-1 split on April 7, 2006; another 2-for-1 split on September 12, 2001; and a 2-for-1 split on June 27, 2000. This historical context underscores the possibility of another stock split given the current high price.

Consider Nvidia's most recent stock split in July 2021: the company split one share, priced around $600, into four shares valued at $150 each. When the split was announced, the stock price surged over 20% before the split became official.

Today, Nvidia's stock price is more than 55% higher than it was in July 2021 and 27% higher than when the 2021 stock split took effect. With earnings announcements imminent, a spike in the share price would provide even more incentive for management to declare another stock split. Even if the stock experiences a downturn, historical trends still suggest a split is likely. You may wonder when Nvidia will announce its next stock split? Let's see how Intellectia.AI predicts:

Should You Buy Nvidia Ahead of a Potential Stock Split?

While stock splits can generate excitement, investors should avoid making decisions based solely on this factor. The company's financial performance and management's guidance have a far greater impact on its long-term stock performance.

CEO Jensen Huang encapsulated this remarkable fiscal year in the company's fourth-quarter earnings release: "Accelerated computing and generative AI have hit the tipping point. Demand is surging worldwide across companies, industries, and nations."

Nvidia's management has forecasted approximately $24 billion in revenue for the first quarter of fiscal 2025, representing a 234% year-over-year increase. Additionally, they projected a GAAP gross margin between 76.3% and 77%, a significant rise from 64.6% year-over-year. Such an increase in gross margin demonstrates Nvidia's pricing power, a crucial factor in maintaining its leadership in the chip industry.

Regardless of a company's growth rate, investors must consider valuation to avoid overpaying for its stock. For a mature company like Nvidia, the price-to-earnings (P/E) ratio is a key valuation metric, comparing the stock price to its trailing 12 months of earnings. Currently, Nvidia trades at 79.3 times trailing earnings, higher than its five-year median of 71.9. However, its forward P/E ratio, which compares the stock price to expected earnings over the next 12 months, is a more reasonable 37.6.