I was taking a look at the general semiconductor industry and was surprised by the metrics of NVDA. The company is valued at 780 Billion when only posting 3 billion dollars in cash flow. Furthermore, NVDA is priced to trade 51 times forwards earnings next year. The forward FCF measure will likely be greater than 51 times as NVDA also has capex costs of around 1 billion in recent years.
I also do understand the semiconductor industry is extremely cyclical (especially for GPU producers). This can lead to these metrics becoming misleading in some scenarios but in this case they are still concerning. At this valuation even if NVDA 5x FCF they would trade at 52 times FCF. This is extremely concerning.
I do understand NVDA is a high growth company as the general GPU and semiconductor market grows. However this valuation seems obscene and reminds me a lot of NVDA before the big sell of from its former valuation at similar levels.
Seems that going short through ITM or ATM long dated puts seems legitimate. What do you guys think?
Submitted May 19, 2023 at 12:08AM by ST530 https://ift.tt/7f6ajxo
