NVIDIA Stock Faces Pressure Near Support Amid Decline, Analysts Remain Cautious Yet Optimistic

Technical Analysis

NVIDIA Corporation (NVDA) closed at $108 on September 3, 2024, experiencing a notable decline of 9.53% from the previous close. This decline has taken the stock near critical support levels around $107.29, which aligns closely with the 52-week low and could present a bounce-back opportunity if respected.

The Relative Strength Index (RSI) sits at 43, indicating the stock is nearing oversold territory, which, combined with the recent price drop, suggests potential for a short-term reversal. The stock’s 50-day moving average is positioned significantly above the current price at $120.07, indicating bearish momentum. The Moving Average Convergence Divergence (MACD) is positive at 6.46, signaling potential for a bullish crossover if upward momentum sustains.

For the next trading day, NVDA is expected to test the support at $107.27; failure to hold this level could lead to further declines. Resistance is encountered at $120.99, where sellers may emerge, creating a challenging upward trajectory in the short term.

Fundamental Analysis

NVDA's last earnings per share (EPS) stands at $2.14, equating to a price-to-earnings (PE) ratio of 50.47, which is elevated but not unusual for growth-driven tech firms. The discounted cash flow (DCF) analysis provides an intrinsic value around $62.54, indicating the stock may be overvalued compared to current market conditions, particularly with a market cap of approximately $2.65 trillion.

With a dividend yield of just 0.01%, the company is likely more focused on growth and reinvestment rather than returning capital to shareholders at this stage. The upcoming earnings announcement scheduled for November 19, 2024, will be critical in shaping investor sentiment and could serve as a catalyst for stock movement.

Long-Term Investment Potential

Long-term potential remains robust given NVIDIA's leadership in high-demand sectors like AI and gaming. Analysts project a consensus target of $114.74, with a median target of $125, reflecting general optimism among analysts despite short-term volatility.

However, the current valuation metrics suggest caution for new investments unless the stock demonstrates a clear upward trend corroborated by improving fundamentals or broader market support.

Overall Evaluation

Given the technical downtrend, proximity to critical support levels, and stark contrast between current pricing and fundamental valuation metrics, NVDA is best categorized as a *Hold* candidate. The reasoning behind this classification rests on the potential for short-term recovery provided by immediate support levels and positive analyst sentiment, while still needing to monitor for further validation of intrinsic value and overall market conditions before proceeding with an aggressive buy or sell stance.