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NVDA Stock Analysis: Balancing Momentum and Regulatory Risks

StockInvest.us, 2 weeks ago

NVIDIA Technical Analysis

NVIDIA Corporation (NASDAQ: NVDA) closed at $1,209.98 on June 06, 2024, experiencing a drop of 1.18% from the previous day. Despite this minor dip, NVDA has demonstrated strong upward momentum with a year high of $1,255.87, significantly above its 50-day moving average ($925.87) and 200-day moving average ($650.54). The Relative Strength Index (RSI) is at 80, indicating that the stock is currently overbought.

Trading volume spiked to 65.44 million shares, above the average volume of 49.22 million, suggesting heightened market activity possibly due to the upcoming 10-for-1 stock split on June 10th. MACD (3-month) at 76.79 supports the bullish momentum, while the Average True Range (ATR) of 3.91 indicates high volatility. Immediate support is noted at $1,139.01, with resistance around $1,224.40.

Fundamental Analysis

NVIDIA's market cap has reached $2.98 trillion, reflective of the stock's impressive performance and investor confidence. The Earnings Per Share (EPS) stands at $17.14 with a Price-to-Earnings (PE) ratio of 70.59, suggesting high valuation possibly justified by expected future growth. The company's Price-to-Earnings ratio is significantly elevated compared to industry norms, reflecting investor expectations for sustained or growing profits.

The Discounted Cash Flow (DCF) value is $544.70, considerably lower than the current price, which may indicate overvaluation on a fundamental basis. Notably, impending antitrust investigations by the DOJ and FTC could introduce regulatory risks, though sector outlook and market position remain robust.

NVIDIA Next Trading Day and Weekly Predictions

For the next trading day, June 07, 2024, NVDA might experience substantial price fluctuations due to investor reactions to the upcoming stock split and regulatory news. Short-term resistance at $1,224.40 will be key, and breaching this could propel prices higher. Conversely, failing to hold the support at $1,139.01 could trigger a slight correction.

Over the next week, the stock's performance will likely be influenced by the stock split scheduled for June 10th. Historical patterns suggest a potential increase in investor interest post-split, potentially leading to short-term upward movement. However, the regulatory probes present a downside risk that could temper gains.

Intrinsic Value and Long-term Investment Potential

While the DCF valuation implies that NVDA is trading significantly above its intrinsic value of $544.70, its dominance in the AI and GPU markets, coupled with consistent innovation, positions it well for long-term growth. The high PE ratio suggests that investors are pricing in substantial future earnings growth; however, regulatory risks and market competition need to be considered.

Overall Evaluation

Considering technical indicators, market enthusiasm, and fundamental valuation juxtaposed with regulatory concerns, NVDA is categorized as a 'Hold'. The stock exhibits strong market momentum and future growth potential, balanced against the risk of overvaluation and impending regulatory scrutiny. Investors may find value in maintaining their positions while closely monitoring upcoming news and adjusting based on regulatory developments and post-split performance.

Check full NVIDIA forecast and analysis here.