Achieving a trillion-dollar market cap is a rare milestone with Nvidia (NVDA) momentarily reaching the upper-echelon task this week. Used as an indicator of a company’s current value, market capitalization is calculated by multiplying the current share price by the number of shares outstanding.

Driven by strong demand for its artificial intelligence (AI) chips, Nvidia joined the likes of Amazon (AMZN), Alphabet (GOOGL), Apple (AAPL), Microsoft (MSFT), Meta Platforms (META), and Tesla (TSLA) as other publicly traded companies to have hit a trillion-dollar market cap on the U.S. stock exchanges.

Notably, Apple was the first company to reach the milestone back in 2018. Naturally, investors expect that stocks with such value will continue to edge out large returns with Nvidia leading the way so far this year. Along with Nvidia, Meta Platforms currently stands out among this rare list with both stocks sporting a Zacks Rank #1 (Strong Buy). 

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Market Cap

Nvidia hit a trillion-dollar market cap on Tuesday after reaching 52-week highs of $419.38 per share. Currently trading at $378 a share, Nvidia has a market cap of $990.74 billion at the moment. As for Meta, the company hit a trillion-dollar market cap in June 2021 and is currently valued at $672.77 billion with shares trading at $264.

As of now, four companies retain their trillion-dollar status with Apple, Alphabet, Amazon, and Microsoft all maintaining their 12-digit valuation. With that being said, rising earnings estimate revisions make Nvidia and Meta very intriguing at the moment as this is often a main catalyst in the upward price movement of a stock.

Earnings Estimate Revisions

Nvidia’s current fiscal 2024 earnings are now projected to climb 48% at $4.96 per share compared to EPS of $3.34 in FY23. Fiscal 2025 earnings are expected to rise another 31% at $6.50 per share.

Notably, earnings estimate revisions have gone up in the last week with Nvidia beating its Q1 top and bottom line expectations last Wednesday by 10% and 18% respectively. In correlation, fiscal 2024 earnings estimates have risen 9% over the last seven days with FY25 EPS estimates up 5%.

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Turing to Meta, earnings estimates have continued to trend higher over the last two months with the company exceeding its Q1 top and bottom line expectations in late April. As shown in the chart below, Meta’s FY23 EPS estimates are closer to where they were a year ago before inflationary concerns begin to largely disrupt the earnings outlook for most companies.  

This has contributed to and sustained this year’s rally. To that point, Meta’s FY23 EPS estimates have now soared 15% over the last 60 days with FY24 earnings estimates up 14%. Meta’s earnings are now expected to rise 22% this year and climb another 23% in FY24 at $14.80 per share.

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P/E Valuation

With large market caps and such extensive rallies this year, monitoring the valuation of Nvidia and Meta stock will be important.

In this regard, Meta stock is more attractive relative to its past. Trading at 21.8X forward earnings, META stock is close to the S&P 500’s 19.6X and nicely beneath its industry average of 39.6X. Furthermore, META still trades 79% below its decade high of 105.1X and at a 26% discount to the median of 29.4X.

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Nvidia’s P/E valuation is not as compelling at 84X forward earnings but optimism surrounding the company’s AI capabilities may warrant a premium. Nvidia does trade 29% below its decade-long high of 118.6X but above the median of 38.6X.

Nvidia stock also trades above its industry and the bencmark's average of 19.6X but the company is the clear-cut leader in its space after becoming the first chipmaker to hit a trillion-dollar market cap.

Bottom Line

Nvidia and Meta’s P/E valuations are not as far stretched as one might think considering their impressive rallies this year. Plus, the rising earnings estimate revisions offer further support and it would be no surprise if this propels shares of NVDA and META higher.  

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2023-06-01T05:56:03Z dg43tfdfdgfd