Sign InNVIDIA Corporation Shows Strong Performance with Overpriced Stock, Caution Advised in Short-Term Investments
Summary
According to a fundamental and technical analysis conducted on July 28, 2023, NVIDIA Corporation's stock seems to be in a decent position for long-term investment, but caution is advised due to its high P/E ratio and the forecasted semiconductor sales slowdown, suggesting that current stockholders should Hold, new investors should wait for a price correction before Buying, and those not favoring long-term investment could consider Selling.
Fundamental Analysis
NVIDIA Corporation (NVDA), traded on NASDAQ, has a market capitalization of $1.13 trillion. The company ended the last trading day at a price of $459, demonstrating a positive change of 0.99%. NVDA has a strong year-on-year performance with a year high price of $480.88, as against a year low price of $108.13.
The company has a high average daily trading volume of 49.47 million shares, with the last day trading showing a volume of 45.31 million shares. The outstanding shares for the company stand at 2.47 billion.
As far as profitability is concerned, NVIDIA has an earnings per share (EPS) of $1.92, which appears healthy. However, the high PE ratio of 239.06 suggests that the stock is overpriced, signaling caution in short to medium-term investments.
Strong partnerships and alliances, especially with tech giants like ServiceNow and Accenture, have boosted NVIDIA's market position, increasing its potential for healthy returns.
Technical Analysis
Starting with the Relative Strength Index (RSI14), NVIDIA stands at 64. This is leaning towards being overbought but doesn't raise major red flags. The uptrend of the stock is further confirmed by the 50 and 200 Day Moving Averages. The stock is trading well above the 50-Day Moving Average of $402.76 and the 200-Day Moving Average of $251.40.
The Moving Average Convergence Divergence (MACD) of 13.67 further affirms the stock's bullish run.
On the flip side, semiconductor stocks could be affected by the forecasted 10% sales slowdown in 2023 as announced by Taiwan Semiconductor Manufacturing. Given NVIDIA's activities in the semiconductor sector, this might affect their stock performance adversely in the medium term.
Stock Price Predictions
For the upcoming trading day on July 28, 2023, based on the Discounted Cash Flow (DCF) valuation, the stock price could potentially rise to $460.35.
Looking at the target estimates, the high estimate stands at $600, while the low estimate is at $133. The median target price is $240, quite below the present trading value, indicating that the stock might be overpriced. For the upcoming week, taking into account other technical and fundamental indicators and the DCF valuation, the price could be expected to hover around the current levels or witness a slight upswing.
Conclusion: Stock Evaluation
Considering the fundamental analysis, the technical indicators and including the news sentiment (which seems largely positive), the stock seems to be in a decent position for long-term investment. However, its high P/E ratio signals an overvaluation in the short to medium-term.
Hence, it is recommended to consider "Holding" the stock if already owned. New investors or short-term traders are advised to wait for a price correction before "Buying". The foreseeable semiconductor sales slowdown and the high P/E ratio make "Selling" a viable option for those not favoring a long-term investment.
