NVDA Analysis: Technical Uptrend, High Valuation, and Growth Prospects

StockInvest.us, 1 week ago

NVIDIA Technical Analysis

NVIDIA Corporation (NVDA) closed on July 09, 2024, at $131.38, reflecting a 2.48% increase from the previous trading day. The stock's price fluctuated between a low of $128.66 and a high of $133.82. The RSI14 reads 50, indicating a neutral momentum and lack of definitive overbought or oversold conditions. NVDA currently trades above both its 50-day moving average ($109.16) and its 200-day moving average ($73.39), highlighting a strong uptrend. The MACD (3-month) of 4.98 confirms bullish momentum. The Average True Range (ATR) of 4.07 suggests higher volatility.

Key technical levels to watch include support at $120.998 and resistance at $131.88, slightly above the last close, which will be crucial for short-term price movement. The stop-loss level is defined at $123.50 to mitigate downside risks.

Fundamental Analysis

NVDA's market cap stands at a robust $3.23 trillion, indicating significant market confidence and scale. The stock is priced with a high P/E ratio of 76.83, reflecting investor expectations for continued high growth. The EPS of $1.71 signals positive earnings, though the market expectations embedded in the high P/E ratio suggest the necessity to sustain these earnings or exceed market forecasts.

The next earnings announcement on August 28, 2024, would be critical, given the anticipatory movements in the stock driven by planned product launches. The recent news highlighting the strong demand for the Blackwell system and raised FY26 sales estimates to $204 billion underscores bullish sentiment.

DCF valuation places the intrinsic value at $57.53, significantly lower than the current market price, suggesting that the stock is potentially overvalued at present levels.

NVIDIA Near-term Forecast

For the next trading day on July 10, 2024, given the recent upward momentum and the proximity to the resistance level at $131.88, NVDA may initially face selling pressure. However, should it break through this level, further gains could be expected in the short term. For the upcoming week, the stock may continue to be buoyed by positive sentiment from recent bullish analyst upgrades and product demand forecasts.

Long-term Investment Potential

NVDA's long-term potential remains robust, primarily driven by its strong positioning in crucial growth sectors such as AI, GPU technology, and the metaverse. The consensus target median price is $115, which is below the current market price; nevertheless, the high target is at $220, illustrating diverse market opinions about growth expectations.

While the intrinsic DCF value suggests overvaluation, long-term prospects may justify the premium due to sustained growth in revenues and market expansion. Market and sector leadership in burgeoning industries such as artificial intelligence and metaverse present NVDA with substantial growth opportunities.

Overall Evaluation

Categorizing NVDA as a potential 'Hold' rests on both technical and fundamental analysis. The stock's current price factors in very high growth expectations, evidenced by its P/E ratio and valuation above intrinsic DCF calculations. While recent bullish momentum and strong product demand present attractive catalysts for further gains, existing high valuation warrants caution.

Conclusively, NVDA remains a formidable player in its industry with substantial long-term growth prospects, but investors should be mindful of near-term valuation risks. Traders may benefit from current momentum, while long-term investors should weigh prospects against the high premium price.

Check full NVIDIA forecast and analysis here.