Nvidia shares plummet, analyst sees decade-low valuation

He emphasized, “This is the cheapest multiple on Nvidia in about a decade. We’re at 16.5 now,” adding, “I do think that, like I said, we’re all writing off Nvidia, but it is the cheapest that it’s been. We’ve got to focus on that.”

The stock fell 6.94% during the trading session, closing at $186.24. This decline follows a broader trend, with the stock down 22.04% over the past month and only up 0.09% for the year 2026.

Analysts project an average earnings per share (EPS) of $9.3124 for the fiscal year ending January 2027, translating to a price-to-earnings ratio of approximately 20x at the current price. Estimates for fiscal 2028 are higher, at $15.9146, suggesting a ratio closer to 12x. A calculation of the next 12 months supports Cramer’s assessment.

Historically, Nvidia’s forward multiple reached around 17 in late September, the lowest since January 2015, significantly below the 15-year average of 30x when the share price was $228.86.

Nvidia’s recent fiscal second-quarter report revealed revenue of $96.22 billion, a 105.85% increase. Non-GAAP EPS reached $2.22, exceeding expectations of $2.09. Data Center revenue saw a substantial rise of 117%, reaching $89.02 billion. The company anticipates revenue of $108.0 billion, with a potential variance of 2% for the upcoming quarter.

CEO Jensen Huang noted that the company’s potential revenue growth could be even higher if not limited by supply. He previously stated, “The unconstrained number would be a lot higher.”

Nvidia currently has $99 billion remaining in its repurchase authorization. The company returned $26 billion in the last quarter, with $20 billion allocated to share buybacks, representing 60% of its free cash flow, exceeding its target of 50% or more.

Several factors contribute to the current investor sentiment. These include concerns about shrinking margins, with the gross margin expected to bottom out at 71% to 72% in the fourth quarter due to rising memory costs, and significant investments—nearly $50 billion—in frontier AI labs. Additionally, supply commitments have reached $279 billion, and days sales outstanding have increased to 60 days from 45. The company’s outlook also factors in a potential absence of revenue from Chinese data centers.

Despite these concerns, Cramer’s valuation assessment appears to be supported by the numbers, with the stock trading at a significantly lower multiple than its historical average. However, the wide range of EPS estimates for 2028, from $12.8484 to $18.746, reflects investor uncertainty about the sustainability of Nvidia’s growth. The next earnings report will be crucial in validating Cramer’s view.