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NVIDIA's Fundamental and Technical Analysis Point Towards Potential Risk and Hold Recommendation

StockInvest.us, 1 month ago

NVIDIA Fundamental Analysis

NVIDIA Corporation (NASDAQ: NVDA) is a leading player in the technology sector. As of the close on October 24, 2023, NVIDIA had a market cap of $1.08 trillion, making it a mega-cap stock. The earnings per share (EPS) stand at $1.93, and the company is trading with a high PE ratio of 226.23, implying that investors are expecting high earnings growth in the future compared to the broader market.

The company guidance reveals a target consensus of $359.03, which is significantly below the current price. However, the high target price sits at $800, suggesting substantial upside potential if the company delivers robust growth. It should be noted, however, that even the median target price is below the current price at $290, indicating a possible overvaluation in the stock's current price.

Despite this, the stock's consensus indicates a "Buy" scenario, with 35 analysts offering a "Buy" recommendation while only 3 suggest a "Hold", and 1 recommends a "Sell". This illustrates majority of the analyst sentiments lean towards positive performance.

In the recent news, there are some concerns related to NVIDIA's AI chips. On October 24, 2023, a regulation accelerated the implementation timetable for broader export controls on China's access to artificial intelligence chips for NVIDIA. This regulatory change could impact NVIDIA's trade with China, potentially affecting its sales revenue and profit margins.

Technical Analysis

NVIDIA NVIDIA stock closed at $436.63 on October 24, 2023, posting a $6.88 (1.60%) gain from the previous close. The stock's price has been trying to find support at $432.99 and resistance at $439.38.

The RSI14 is at 49, which typically suggests the stock is neither overbought nor oversold. Meanwhile, the stock’s 200-day moving average of $344.56 is substantially lower than the 50-day moving average of $448.65 and the current price. This indicates that the stock has been in a strong uptrend in the more extended timeframe.

However, the lower average trading volume compared to its 3-month average combined with the negative MACD (3-month) of 8.57 might signal dwindling momentum and could suggest a bearish signal in the short term.

Stock Prediction and Evaluation

In the short term, i.e., for the next trading day on October 25, 2023, the stock may see some volatility due to the latest U.S. regulatory news affecting the company's AI chips business. Monitoring the stock's support and resistance levels is critical, with price levels projected around $432.99 and $439.38 respectively.

For the upcoming week, based on the 14-day RSI and moving averages, the stock's outlook appears to be bullish, and it can likely continue its upward trend unless there is significant negative news.

However, given the potential impact of regulatory changes on NVIDIA's business with China, there is a risk that the stock might not meet the target high of $800. Based on the mixed fundamental and technical signals, and considering the regulatory challenges, a potential "Hold" approach is recommended for NVIDIA. This recommendation suggests that current investors may keep their positions, but new investors may want to observe the company's reaction to the new export controls before deciding to invest.

Check full NVIDIA forecast and analysis here.