Sign InNVIDIA Stock Faces Pressure with Bearish Momentum Amid Overvaluation Concerns and Upcoming Earnings
Summary
As of September 27, 2024, NVIDIA Corporation (NVDA) closed at $121.40, facing pressure from overbought conditions and bearish momentum, while investors remain cautious amid concerns of overvaluation and geopolitical challenges despite strong long-term growth potential in the AI sector.
Technical Analysis
NVIDIA Corporation (NVDA) closed at $121.40 on September 27, 2024, reflecting a decline of 2.13%. The stock's performance is currently under pressure as indicated by the Relative Strength Index (RSI) of 71, suggesting it is approaching overbought territory. Recent trading has seen a price range between $119.26 (low) and $124 (high), with a market cap of approximately $2.98 trillion. The 50-day moving average stands at $115.84, giving a bullish indication relative to the current price; however, the stock trading significantly above the 200-day moving average of $93.95 may reflect overvaluation concerns.
The MACD has turned negative at -3.22, reinforcing bearish sentiment as momentum shows signs of weakening. With an average volume of 326.98 million and recent volume at 266.93 million, liquidity remains healthy but is trending below average. Importantly, the upcoming dividend on October 3, 2024, combined with the company's potential earnings announcement on November 19, 2024, could influence short-term price movements.
Fundamental Analysis
NVIDIA's earnings per share (EPS) is reported at $2.13, leading to a high price-to-earnings (P/E) ratio of 57, indicative of significant market expectations for growth. The discounted cash flow (DCF) analysis suggests an intrinsic value of $64.07, implying that the stock is currently overvalued at its last close. Despite this, strong demand for AI chips in data centers continues to fuel revenue growth, unveiled in recent reports, although concerns about margin sustainability persist.
Recent comments from CEO Jensen Huang regarding competition and export controls emphasize the strategic challenges NVIDIA faces, particularly in relation to China. The landscape for AI chip manufacturing is evolving, and while NVIDIA holds a strong market position, potential disruptions from geopolitical tensions may impact future performance.
Predictions and Evaluations
For the next trading day, NVDA is expected to face resistance around $123.54 and support near $109.21. Given the current bearish momentum and negative MACD, a test of the support level seems probable unless there’s positive market sentiment due to favorable news or market conditions.
Looking ahead to the upcoming week, NVDA may experience volatility in reaction to external comments and market dynamics related to AI and semiconductor industries. If downside pressures persist and significant support levels are breached, further declines might materialize.
Considering intrinsic valuations, market sentiment, and potential earnings growth, NVDA's long-term investment potential remains substantial, but caution is warranted due to prevailing overvaluation metrics.
Overall Evaluation
Given the technical indicators and fundamental concerns about sustainability and geopolitical issues, NVDA is categorized as a 'Hold' candidate. This classification reflects a balance between its robust long-term growth prospects in the AI sector and caution surrounding current valuation and market pressures. Investors may want to observe how it reacts in the near term, particularly with upcoming earnings reports and market conditions.
