Nvidia Corporation (NVDA) Faces Volatility Amid Market Correction - Analysis

StockInvest.us, 3 weeks ago

NVIDIA Technical Analysis

Nvidia Corporation (NVDA) ended trading on June 24, 2024, at $118.11, experiencing a significant decline of 6.68% (-$8.46) from its previous close. The stock oscillated between an intraday low of $118.04 and a high of $124.46 during the trading session. There is a noticeable downtrend over the last few days, with the stock falling approximately 13% from its recent peak, a point where it momentarily held the title of the most valuable company.

Technical indicators present a mixed picture. The Relative Strength Index (RSI14) stands at 53, indicating a neutral stance without significant overbought or oversold conditions. The Moving Average Convergence Divergence (MACD) at 12.28 suggests some recent positive momentum. Contrast this with the volatility indicator, Average True Range (ATR), at roughly 4.70, implying fairly high recent price swings.

Price-wise, NVDA has established notable support at $113.90 and resistance at $121.00. The current price ($118.11) sits precariously between these levels, potentially in line for further volatility. Traders should watch the 50-day and 200-day moving averages of $100.98 and $69.41 respectively, as the current price remains well above both, suggestive of an overarching positive trend.

Fundamental Analysis

From a valuation perspective, Nvidia's market capitalization stands at a substantial $2.91 trillion, showcasing its significant market position. With an EPS of $1.71 and a PE ratio of 69.07, the stock appears overvalued on a price-to-earnings basis, particularly when compared to industry norms. The anticipated earnings announcement on August 28, 2024, will be a crucial event that could provide further insights into the company's performance trajectory.

For a more comprehensive valuation, the discounted cash flow (DCF) metric places the intrinsic value at $56.86, which is considerably lower than the last closing price of $118.11. This discrepancy points towards an overvaluation based on future cash flow projections.

NVIDIA Nvidia offers a minimal dividend yield of 0.01%, making it less attractive to income-focused investors. However, this is understandable given the company's focus on reinvesting profits into growth areas, notably artificial intelligence (AI), which is a key growth driver for NVDA.

Performance Outlook

Given the recent sharp declines, the next trading day (June 25, 2024) could witness some attempts at recovery or consolidation around current price levels, with potential fluctuations touching the support and resistance markers. The upcoming annual shareholder meeting on Wednesday (June 26, 2024) might also inject some volatility based on investor sentiment and any fresh announcements.

For the upcoming week, one could expect continued volatility, especially in light of the vital discussions surrounding executive compensation and strategic direction at the shareholder meeting. This will be critical in reinforcing investor confidence.

Long-term Investment Potential

Although Nvidia's current market price suggests overvaluation, its position as a prime player in the AI revolution cannot be underestimated. Its significant investment in AI technology and dominance in the GPU market positions it well for sustained long-term growth. However, inherent market corrections, as noted by experts, should be expected, providing potential buy-in opportunities during dips.

Overall Evaluation

Considering the detailed technical and fundamental analysis, Nvidia stock could be categorized as a 'Hold' candidate. The present valuation concerns paired with the stock's recent positive momentum and pivotal market positioning in AI underpin this stance. Investors might look to hold their existing positions but should remain vigilant toward upcoming earnings and shareholders' meeting outcomes for further directional clarity.

Check full NVIDIA forecast and analysis here.