Sign InNVIDIA (NVDA) Soars to Record High, But Is Overbought: Analysts Recommend Hold
Summary
As of June 5, 2024, NVIDIA Corporation’s (NVDA) stock surged to a new high closing at $1,224.40, buoyed by strong trading volumes and bullish market sentiment, yet caution is advised due to overbought RSI and significant overvaluation, suggesting potential near-term consolidation despite promising long-term growth in the AI sector.
Technical Analysis
NVIDIA Corporation (NVDA) closed at $1,224.40 on June 5, 2024, marking a significant increase of 5.16% from the previous close. The stock achieved a new high at $1,224.50 within this trading day, reflecting strong upward momentum supported by high volumes (51.51 million) surpassing its average volume (49.31 million).
Key technical indicators include:
- RSI14: 82, indicating the stock is currently in the overbought territory. - 50 Day Moving Average: $920.39, significantly lower than the current price, suggesting strong upward momentum. - 200 Day Moving Average: $646.58, reinforcing the long-term uptrend. - MACD: 70.08, indicating bullish momentum. - ATR: 3.71, depicting the stock's high volatility.
Given the lack of any significant resistance above the current price, the stock has potential to break further highs. However, RSI suggests room for a potential short-term pullback.
Fundamental Analysis
NVDA's market cap has surged to $3.02 trillion, symbolizing it as the second most valuable public U.S. company after overtaking Apple. Nvidia’s PE ratio stands at 71.52, indicating high valuation possibly due to strong growth expectations, widely driven by the AI tech market.
Earnings Per Share (EPS) of $17.12 confirms profitability, while the forthcoming earnings announcement scheduled for August 28, 2024, may offer further insights into growth sustainability. Notably, despite its robust performance, the stock offers no dividend yield, which might not appeal to income-focused investors.
The low intrinsic value (DCF estimate) for NVDA at $541.71 suggests that the stock is currently trading significantly above this value, potentially cautioning about overvaluation.
Near-Term Outlook
Considering the overbought RSI and intrinsic value perspectives, NVDA may experience some pullback or consolidation in the next trading days. The high market optimism and recent achievements, including record high prices and major AI market catalysts, will likely support the bullish momentum for the upcoming week, albeit with potential volatility.
Long-Term Investment Potential
The AI technology sector, which is boosting NVDA’s stock, is projected to continue growing. Although the current valuation appears stretched, NVDA's strategic positioning as a leader in AI chips and technology underpins its strong long-term growth potential. However, investors should weigh in the potential risks associated with current high valuations.
Overall Evaluation
Taking into account both technical and fundamental analysis:
- Categorization: Hold.
This evaluation stems from the robust market performance and future growth potential driven by AI technology. However, given the overvaluation and the current technical indicators suggesting a possible pullback, it is prudent to maintain a cautious stance before considering new positions.
