Analyst Questions Nvidia's Valuation After Company Earned Less Than 20% Of Meta's Profits In 2022: 'Are Expectations Too High?'

Nvidia Corp. NVDA shares have been the best-performing mega-cap stock so far this year, thanks to its work in artificial intelligence. The stock is up about 86% year to date.

Pricey Valuation? The spike apparently has made the stock pricey for investors. On Friday, Charlie Bilello, the founder of Compound Capital Advisors, shared a graphic showing two valuation metrics, namely the price-to-sales ratio and price-to-earnings ratio from 2000 to date.

The analyst said that Nvidia currently traded at 26 times sales and 160 times earnings. “Investors pricing in huge growth rates but are expectations too high?” he asked.

NVIDIA trading at 26x sales and 160x earnings. Investors pricing in huge growth rates but are expectations too high? $NVDA pic.twitter.com/VNyD54CvAx

— Charlie Bilello (@charliebilello) April 21, 2023

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Nvidia Vs. Meta: Bilello made a comparison between the operational metrics of Nvidia and Meta Patforms, Inc. META. He noted that Nvidia has a market cap of $668 billion compared to Meta’s $551 billion. This is despite Nvidia generating only roughly 17.4% of Facebook’s net income.

Nvidia’s calendar year 2022 was about $4 billion compared to $23 billion for Meta, he said.

NVIDIA Market Cap: $668 Billion
Facebook Market Cap: $551 Billion

NVIDIA Net Income: $4 Billion (-54% YoY)
Facebook Net Income: $23 Billion (-38% YoY)$NVDA $META pic.twitter.com/I2fYxV2BAW

— Charlie Bilello (@charliebilello) April 21, 2023

The average analysts’ price target for Nvidia shares is $286.94, according to data compiled by TipRanks. This suggests roughly a 6% upside from current levels. Nvidia ended Friday’s session at $271.19, up 0.06%, according to Benzinga Pro data.