Sign InNVIDIA Corporation's Fundamental Analysis Suggests 'Hold' Position Amidst Trade War Concerns
Summary
Based on fundamental analysis, technical indicators, and market sentiment, it is suggested that NVIDIA Corporation (NVDA) may be rated as a 'Hold' due to its high valuation, potential short-term volatility from the looming trade war, and uncertainty surrounding the AI chip export rules, which may impact the company's growth. (Analysis conducted on June 29, 2023)
Fundamental Analysis
NVIDIA Corporation (NASDAQ: NVDA) has a market capitalization of $1.01 trillion based on a last closing price of $408.22 on June 29, 2023. The stock witnessed a minor decline of 0.72% from the previous close, settling down $2.95 for the day. The corporation, which specializes in designing and manufacturing graphical processing units (GPUs) for gaming and professional markets, has notched a high and low within the year of $439.9 and $108.13, respectively.
The company's earnings per share (EPS) stands at $1.97, resulting in a relatively high price-to-earnings (PE) ratio of 207.22, illustrating a steep valuation. However, investment evaluations need to weigh this against the firm’s growth prospects, particularly in the burgeoning AI and semiconductor market. The outstanding shares count for NVDA is 2.47 billion.
Recent news updates reflect a mixed sentiment about the company's prospects. On the one hand, the Q1 results exceeded expectations, showcasing robust growth. On the other hand, experts warn about its overvaluation and whether the growth can be sustained at the same pace. The looming impact of the AI chip export rules due to the escalating US-China trade war could potentially hamper Nvidia's growth, given that China constitutes a notable share of the company's revenues.
The discounted cash flow (DCF) method suggests a valuation of $409.57. Analysts’ targets range from $600 to $133, with a median prediction of $240, which is quite below the current price level.
Technical Analysis
The stock's 50-day moving average is $340.90, and the 200-day moving average stands at $221.73. Both these levels are significantly lower than the current stock price, indicating a strong uptrend. The relative strength index (RSI) of 60 suggests a slightly overbought condition, but not a severe one.
The moving average convergence divergence (MACD) of 31.95 propounds the ongoing bullish trend, despite the negative change registered on the last trading day. The stock’s trading volume for the day was 37.36 million shares, compared to the average volume of 47.69 million shares.
Stock Prediction
Using the data provided and considering the varying market factors, the NVDA stock may experience short-term volatility due to the looming trade war and its stretched valuation. This may dip the price slightly in the upcoming trading day and week.
Evaluation
Weighing the fundamental valuation, technical indicators, and market sentiment, it is proposed that NVDA may be categorized as 'Hold.' The growth prospects of the company in the AI and semiconductor market cannot be ignored despite its high valuation. The uncertainty introduced by the AI chip export rules should make investors cautious, hence supporting a holding position to evaluate the developments and the company's ability in overcoming the pending challenges.
