Sign InSummary
As of July 10, 2024, NVIDIA Corporation (NVDA), closing at $134.91 with a 2.69% rise, reveals substantial growth potential driven by its AI advancements, despite signals of overvaluation and cautious short-term technical indicators suggesting a 'Hold', particularly ahead of the pivotal earnings announcement on August 28, 2024.
Technical Analysis
NVIDIA Corporation (NVDA) closed at $134.91 on July 10, 2024, marking an increase of $3.53 (2.69%). The stock's trading range for the day saw a low of $132.42 and a high of $135.09. The Relative Strength Index (RSI14) value of 49 suggests a neutral position, neither overbought nor oversold. NVDA's 50-day moving average is $110.13, and its 200-day moving average stands at $73.83, indicating a significant upward trend. The MACD over the past three months is positive at 4.03, which is a bullish signal. The Average True Range (ATR), a measure of volatility, is 3.88, suggesting moderate volatility. Currently, the stock faces resistance at $135.58, and support is at $120.998.
For the next trading day on July 11, 2024, the technical indicators suggest a potential minor pullback, given the proximity to resistance levels. However, over the upcoming week, NVDA may see continued upward momentum, potentially testing the recent resistance, particularly fueled by the positive news surrounding AI server sales and increasing interest from lawmakers.
Fundamental Analysis
NVIDIA’s market capitalization stands robust at $3.32 trillion. The company boasts an EPS of 1.71 and a PE ratio of 78.89, which indicates high investor expectations for future earnings growth. Despite a relatively high PE ratio, implying the stock might be overvalued, the recent news about NVIDIA's ambitious AI server sales and positive attention from congressional members underline strong future growth potential.
The upcoming earnings announcement on August 28, 2024, will be a crucial event, possibly reinforcing or questioning the bullish sentiment. NVIDIA’s AI technology advancements substantiate their leadership in the sector, hinting at substantial future revenue streams, which aren't fully captured by the current discounted cash flow (DCF) valuation of $57.53.
The median price target consensus is at $115, indicating analysts see potential room for adjusted valuation and corrections. However, the high target of $220 suggests considerable upside potential reflecting bullish market confidence.
Intrinsic Value and Long-term Investment Potential
The DCF value of $57.53 suggests the current market price is significantly above the calculated intrinsic value, which traditionally would signal overvaluation. However, considering the company's dominant market position in AI and those bullish predictions around its AI server sales potentially rivaling iPhone sales, NVIDIA is positioned for substantial growth long-term.
Investors with a long-term horizon might look past the current overvaluation, betting on NVIDIA's technological advancements and its pivotal role in the AI evolution, which promises considerable future earnings.
Overall Evaluation
Given the technical and fundamental analysis, NVIDIA's stock currently demonstrates strong momentum powered by its groundbreaking contributions to AI technology and favorable sentiment in the market. The high PE ratio and the stock price premium over its DCF value indicate some level of risk, primarily if future earnings do not meet high expectations. However, the analyst consensus and substantial number of 'buy' and 'strong buy' ratings provide a positive outlook.
Considering these factors, NVIDIA (NVDA) can be categorized as a 'Hold' candidate. The stock has solid growth potential for those already invested, given the favorable market dynamics and strategic advancements. However, for new investors, cautious monitoring is suggested until a more attractive entry point is reached, potentially post next earnings report or if it nears its support levels.
