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Wall Street’s ‘Dean Of Valuation’ Says Nvidia Stock Is ‘Priced To The Point Of Insanity,’ But These 2 Magnificent 7 Stocks Can Be Bought Right Now
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Aswath Damodaran: Skip Nvidia, Buy Apple and Tesla Instead
In a recent interview, NYU finance professor Aswath Damodaran, who is commonly regarded as the “Dean of Valuation,” discussed the valuations of the so-called Magnificent Seven stocks. In his interview, he noted that many of the stocks are overpriced. Damodaran specifically pointed out that Nvidia’s stock price has reached levels of “insanity” and is significantly overvalued based on its current earnings and cash flow potential. Despite Nvidia’s strong performance in the past, he believes it is now too expensive to justify its current price of over $682.
Conversely, Damodaran highlighted that Apple and Tesla present more attractive buying opportunities within the Magnificent Seven group. He mentioned buying Tesla at $180 recently and remains optimistic about Apple’s potential, viewing it as a “slow-growth cash machine.” According to Damodaran, both Apple and Tesla offer better value compared to other tech giants, making them reasonable buys at their current prices.
In summary, while Damodaran views the broader tech group as generally overvalued, he sees particular promise in Tesla and Apple for investors looking to enter the market.
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New York University’s Aswath Damodaran believes the so-called Magnificent Seven stocks are overpriced, but there are a few names in the group that really stand out.
What To Know: Damodaran, who’s often referred to as the “Dean of Valuation,” teaches finance and equity valuation at NYU’s business school.
Tuesday on CNBC’s “Closing Bell,” the finance professor flagged Nvidia Corp NVDA +7.90% as being “priced to the point of insanity.”
If you bought Nvidia at the right time, it was an “amazing” buy, but at today’s prices, it stands out as being particularly overpriced, Damodaran said after assessing current valuations of the Magnificent Seven stocks.
“You can get pretty close to the current prices for the other companies. Nvidia, I can’t even get close,” he said.
“The last time I valued it, Nvidia was at $400 … at $682 that’s a stretch. Given the current earnings potential and cash flows, I just can’t get there. Maybe I’m just missing some part of the picture, but to me it doesn’t make sense.”
On the other end of the spectrum, Damodaran believes Apple Inc AAPL +0.92% and Tesla Inc TSLA +0.47% currently have the most attractive valuations in the Magnificent Seven.
Although the entire group feels a bit overpriced, investors that don’t have any exposure to the Magnificent Seven stocks and want to buy in should look at Apple and Tesla, he said.
Damodaran told CNBC he bought Tesla shares around $180 a couple of weeks ago. The stock has been under pressure in recent months amid concerns over the pace of EV adoption and is currently down about 25% since the start of the year.
The NYU professor is also high on Apple at current levels. The iPhone maker’s stock performance has been tied to upgrade cycles for iPhones, Damodaran said.
The company has a bad year when upgrades are down and a good year when there is a big upgrade cycle during the course of the year, he said, adding that he sees room to the upside from here.
“I think Apple will bounce back a little bit. It’s a slow-growth cash machine and people have to be realistic about what they are getting, but I think at $188, it’s as good a buy as any of the other seven,” Damodaran said.
NVDA, AAPL, TSLA Price Action: At the time of writing, Nvidia shares were up 2.77% at $701.12 and Tesla shares were up 1.80% at $188.44, while Apple shares were down 0.071% at $189.19, per Benzinga Pro.
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