NVIDIA (NVDA) Shows Potential Upswing with Strong Support and Resistance Levels Ahead of Earnings

Technical Analysis

NVIDIA Corporation (NVDA) closed at $119.37 on August 30, 2024, with a daily increase of 1.51%. The stock is trading just below its 50-day moving average of $120.30, suggesting potential resistance at this level. The price range for the last trading day was $117.22 to $121.75, with strong support observed around $109.63. The relative strength index (RSI) stands at 60, indicating that NVDA is approaching overbought territory, yet it still possesses upward momentum. The Moving Average Convergence Divergence (MACD) indicates bullish trend momentum with a value of approximately 5.44, reinforcing the short-term positive outlook.

Looking ahead to the next trading day, NVDA could test the resistance at $120.99, especially considering the bullish sentiment in the market leading up to the earnings announcement on November 19, 2024. Over the upcoming week, if the stock breaches this resistance, it may have the potential to reach the upper end of its year high near $140.76. Conversely, should it fail to hold above the $117 level, the stock may revisit the support at $109.63.

Fundamental Analysis

NVIDIA's market capitalization stands at approximately $2.94 trillion, reflecting its status as a powerhouse in the semiconductor industry, particularly in AI and GPU markets. The last reported earnings per share (EPS) is $2.13, with a price-to-earnings (P/E) ratio at 56.04, indicating a premium valuation often seen in high-growth sectors. Analysts have set a target median price of $125, suggesting a potential upside of roughly 4.63% from the last closing price.

Despite a cautious tone in some recent news, the long-term growth prospects for NVDA appear robust, bolstered by increasing AI spending among large tech firms. The discussion around competition with AMD intensifies but also emphasizes the expanding market that both companies are targeting. Furthermore, the upcoming dividend payment scheduled for October 3, 2024, reflects a sustained commitment to returning value to shareholders, albeit at a modest yield of 0.01%.

Intrinsic Value and Long-term Potential

The discounted cash flow (DCF) analysis suggests an intrinsic value of approximately $62.69, significantly lower than the current market price. This discrepancy indicates that the stock may be overvalued based on traditional valuation metrics. However, this analysis does not account for the potential revenue growth driven by AI and data centers, areas where NVIDIA is strategically positioned.

The consensus among analysts remains positive, with a classification of 1 strong buy, 40 buys, 4 holds, and only 2 sells, signaling overall enthusiasm for NVIDIA's future performance.

Overall Evaluation

Given NVDA’s current performance, market sentiment, and strategic position in a high-growth sector, the classification stands as a 'Buy' candidate. The price action suggests potential upward movement toward resistance levels, backed by institutional support and favorable market dynamics, particularly surrounding AI and data analytics, which are expected to drive future earnings growth. However, investors should remain cognizant of potential volatility, driven by macroeconomic factors and competitive pressure within the semiconductor market. Therefore, while the stock commands a premium valuation, its growth trajectory could justify the current price in the context of its innovative capacity and market demand.