Sign InNVIDIA (NVDA) Stock Analysis: Mixed Forecasts and High Valuation Raise Caution
Summary
NVIDIA Corporation (NVDA) is a major player in the technology sector with a high profitability and a high valuation, and while analysts have mixed forecasts for the stock, there is a consensus of Buy, with upcoming earnings report and positive sentiment from renowned investor David Tepper contributing to a positive outlook, along with favorable technical indicators, although the high PE ratio suggests caution for potential investors due to its overvalued situation, making it recommended for investors with a higher risk tolerance, categorizing it as a 'Hold'.
Fundamental Analysis
NVIDIA Corporation (Ticker: NVDA), with a market cap of $1.09 trillion, is a major player in the technology sector listed on NASDAQ. With an Earnings per share (EPS) of $1.91, it ranks high in profitability measures. However, a Price/Earnings ratio (PE) of 230.05 significantly exceeds the industry average, indicating a rather high valuation for the stock. The shares outstanding are 2.47 billion.
There's a mixed message from analysts’ forecasts for NVDA – median target price is $240, considerably lower than the last close at $439.40, yet the targeted high stands at a significant $600. Given a strong buy analysis prediction from 36 analysts compared to three holds and one sell, the consensus amongst them is a 'Buy'.
News concerning NVDA points to anticipation ahead of the company's Q2 earnings report. NVDA’s performance in this report could significantly influence the stock's motion due to analysts raising their price targets on the stock.
With earnings scheduled to be announced on August 23, 2023, a sudden surge or dip in stock price is a potential scenario. However, the introduction of new bets by renowned investor David Tepper, expressing a positive outlook on NVDA alongside the growing significance of the AI sector where NVDA is a pivotal part, promotes a positive sentiment for NVDA's stock.
Technical Analysis
The NVDA stock has demonstrated a year-high of $480.88 and a year-low of $108.13, signifying considerable volatility. As of August 15, 2023, NVDA closed at $439.40, a slightly above its 50-day moving average of $430.89, and significantly above the 200-day moving average of $272.52, indicating a bullish trend.
The relative strength index (RSI14) of 44 neither implies an overbought nor an oversold condition, giving room for both upward and downward movement. The Moving Average Convergence Divergence (MACD) of 2.94 also points towards a potential bullish trend, fostering a positive signal.
The Average True Range (ATR), a measure of volatility, stands at 3.86 indicating a considerable volatility in the stock price. In terms of support and resistance levels, NVDA faces resistance at $443.09 and support at $401.11.
On August 15, 2023, NVDA witnessed volume trade of 66.80 million shares, up from the average 50.63 million shares, suggesting amplified investor interest or heightened trading activity.
Stock Prediction and Final Evaluation
Given current conditions, NVDA’s stock price might encounter a minor resistance nearing $443.09 for the next trading day (August 16, 2023), and it could experience volatility during the upcoming week due to the impending earnings announcement. However, robust technical indicators and promising earnings anticipation could potentially push the boundaries.
The consensus towards a 'Buy' and a bullish trend indicated by technical figures place NVDA as a favorable choice for shareholders. However, a PE of 230.05 points out an overvalued situation, cautioning potential investors.
Considering the extensive volatility NVDA has experienced in the past year, and given its high PE ratio, it is recommended for investors with a higher risk tolerance. Examining both the technical and fundamental aspects, NVDA could be categorized as a 'Hold'. It offers potential growth opportunities but is also susceptible to considerable risk due to its high valuation.
