Nvidia Delivers Fantastic News for Nebius Stock Investors! | NBIS Stock Analysis | NVDA Stock
Summary
Parkev states that Nvidia’s decision to increase its ownership in Neobius to nearly 10% has significantly impacted the stock's market sentiment. Parkev highlights a potential concern regarding "circular financing," where Nvidia provides capital to Neobius, which then uses that capital to purchase Nvidia’s AI infrastructure products. Parkev notes that while this lowers the "organic" quality of Nvidia's sales, it provides Neobius with the necessary backing to scale its AI computing rent-out model, which requires massive upfront capital investments.
Parkev updated his financial model to reflect this new strategic partnership, lowering the estimated after-tax cost of debt for Neobius and increasing free cash flow projections. Parkev expects the company to reach positive free cash flow by 2029, estimating it will generate $4 billion annually at that point, up from a previous estimate of $3.5 billion. Despite these improvements, Parkev calculates the fair value of Neobius at $208 per share, which is lower than the current trading price of approximately $217 to $220.
Mentioned Stocks
Reasoning: Parkev maintains a hold rating because his calculated fair value for Neobius is $208 per share, while the market price has risen to approximately $217. Parkev notes that while Nvidia's 9.3% stake is a strong positive signal that improves future cash flow estimates to $4 billion by 2029, the stock is no longer at a discount. Parkev argues that the company needs a longer track record in the market before he would upgrade it to a buy at these valuation levels.