How a stock split works
A stock split divides existing shares into smaller pieces. So, if you previously had one share of Nvidia worth $1,000, you would now have 10 shares of Nvidia each worth $100, for an unchanged total value of $1,000. Stock splits are a way for companies to ensure that investors can easily buy and sell single shares.
Read “What is a stock split?” in the MoneySense glossary.
The massive hype behind Nvidia has resulted in a price-to-earnings ratio of over 55x. By comparison, tech giants Microsoft and Apple currently have ratios of 36x and 29x, respectively. Conventional logic says Nvidia’s growth has to fall back into line at some point—but this sustained period of record earnings is tough to argue with for the moment. Nvidia made 18% more money in Q1 2024 than it did in Q4 2023, and it made a whopping 262% more money than it did in Q1 2023.
To put this growth in perspective, Nvidia’s market capitalization has grown more than $1.1 trillion since Jan. 1, 2024. That’s bigger than the entire market capitalization of Canada’s 14 largest companies—and that’s just growth so far this year!
Founder and CEO Jensen Huang sounded appropriately upbeat in stating, “The next industrial revolution has begun—companies and countries are partnering with Nvidia … to produce a new commodity: artificial intelligence.”
Nvidia bought back $7.7 billion worth of its shares in Q1 and announced it was increasing its dividend from four cents to 10 cents per share (on a pre-split basis).
Frankly, I think it’s just a matter of time until competitors start to close the gap with Nvidia and some of those juicy profit margins start to shrink. That said, there is a whole lot of money to be made while that process plays out. Clearly, investors are willing to pay a premium for Nvidia’s future earnings.
Tough week for U.S. retail
Despite last week’s record good news for Walmart, the first quarter was not universally good for big American retailers. All figures below are in U.S. dollars.
U.S. retail earnings highlights
Quarterly reports from three major retailers:
- Target (TGT/NYSE): Earnings per share of $2.03 (versus $2.06 predicted), and revenue of $24.53 billion (versus $24.52 billion estimated).
- Macy’s (M/NYSE): Earnings per share of $0.27 (versus $0.15 predicted), and revenue of $4.85 billion (versus $4.86 billion estimated).
- Lowe’s (LOW/NYSE): Earnings per share of $3.06 (versus $2.94 predicted), and revenue of $21.36 billion (versus $21.12 billion estimated).
All three of these retail heavy hitters cited a stretched consumer as the main reason for mediocre quarterly earnings reports. Target CEO Brian Cornell explained that low sales numbers reflected “continued soft trends in discretionary categories.” Compared to its rival Walmart, Target has substantially fewer customers coming into its stores to buy groceries, so the consumer shift to necessities appears to be hitting it harder.
Lowe’s CEO Marvin Ellison had similar thoughts on the current retail scene, saying, “Interest rates can go down, but you still need consumer confidence to come up.” Macy’s CFO and COO Adrian Mitchell went so far as to say that its team expects consumers “will remain under pressure for the balance of the year.”
