We recently published a list of the 7 Best Revenue Growth Stocks to Buy According to Analysts. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against the other best revenue growth stocks to buy according to analysts.
The Fed recently cut the funds rate by 50 basis points which has been considered a bold move by some analysts while others and most of the market have welcomed it with open arms. Moreover, over 50% of interest rate traders expect another 50 bps cut in the next meeting as well, according to the CME Fed-watch tool.
While the Fed’s move might seem risky, the broader market is up over 2.5% since the cuts, as of September 27.
Jeremy Siegel on the Fed’s Bold Move
In an interview with CNBC Squawk Box on September 19, Professor Jeremy Siegel of the Wharton School expressed his strong approval of the Fed’s decision to cut interest rates by 50 basis points. He called it the best news from the Fed in years.
Professor Siegel believes that this move will lead to a significant rise in the stock market and pointed out that the Fed is now addressing the gap between current rates and what he considers the “new neutral” Fed funds rate of 2.9%.
He said that the Fed has shifted from expecting only one rate cut by the year’s end to anticipating four cuts in total, with the market reflecting expectations of a gradual approach to future cuts.
When asked about concerns from former Fed Vice Chair Roger Ferguson, who warned that the market might be overreacting to the cuts, Siegel said that smaller, consistent rate decreases would be enough.
He suggested that if inflation remains low, the Fed could implement 25 basis point cuts in the upcoming meetings, ultimately reducing rates to around 3.3% to 3.5%. He said with confidence that inflation would not rise significantly, as he referenced the market indicators suggesting it could fall below 2% next year.
In a discussion about economic policies from the presidential candidates, Professor Siegel critiqued both sides as extreme and said that their policies are unlikely to be implemented. He said that there would be a divided government that would limit any drastic changes. He stressed that while some policies might be proposed, actual governance would lead to compromises rather than sweeping reforms.
Historical Insights on Rate Cuts and Stock Returns
According to data from Ned Davis Research, historical trends indicate that stocks tend to perform favorably in the year following the initial interest rate cut. According to the data, the broader market has recorded an average increase of around 12% in the first six months and 15% in the first twelve.
Despite the generally positive outlook for stocks following interest rate cuts, there were exceptions in 2001 and 2007, when the broader market saw declines of 12.4% and 22.2%, respectively, in the year following the Fed’s actions. This shows that historical average performance does not guarantee that rate cuts will always yield favorable outcomes.
However, looking at the last ten rate cut cycles since 1974, the market has risen in eight of those instances, with four cycles resulting in gains of over 20%. Additionally, after the 1974 cut cycle, the market reached a remarkable 40% increase.
Our Methodology
For this article, we used stock screeners to compile a list of over 30 stocks with 5-year revenue compound annual growth rate of 30% or above. Next, we narrowed our list to 7 stocks most favored by analysts. The 7 best revenue growth stocks are listed in ascending order of their average analyst price target upside as of September 27.
We also mentioned the hedge fund sentiment around each stock.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is NVIDIA Corporation (NASDAQ:NVDA) One of the Best Revenue Growth Stocks to Buy According to Analysts?
NVIDIA Corporation (NASDAQ:NVDA)
Average Price Target Upside: 23.56%
5-Year Revenue CAGR: 56.73%
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) specializes in graphics, computing, and networking solutions. Established in 1993, the company initially carved out a niche with its pioneering graphics processing units (GPUs), which excel at handling multiple tasks simultaneously.
The innovation has made it a critical player not only in the gaming industry but also in sectors such as professional visualization, data centers, and automotive markets. The company operates through two main segments, Graphics and Compute & Networking.
The Graphics segment includes GeForce GPUs and the GeForce NOW game streaming service, while the Compute & Networking segment features data center platforms and advanced AI software.
Its stock has received a consensus Strong Buy rating from 64 analysts. As of September 27, the average price target of $150.00 has an upside of 23.56% from current levels. It ranks 5th on our list of the best revenue growth stocks to buy according to analysts.
In 2023, NVIDIA (NASDAQ:NVDA) captured an impressive 94% market share in AI server sales as per Mizuho Securities analyst Vijay Rakesh’s estimates, which reinforces its dominance in the rapidly growing AI GPU market.
The company’s data center revenue has surged at a rate significantly outpacing that of competitors, which show a strong demand for its products. Customers are actively seeking NVIDIA’s Hopper AI GPUs, which are expected to be succeeded by the next-generation Blackwell chips. The demand for these upcoming processors is projected to surpass supply through 2025, which is a sign of a strong pipeline for future revenue.
Overall, NVDA ranks 5th on our list of the best revenue growth stocks to buy according to analysts. While we acknowledge the potential of NVDA as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.