It’s been a rocky few months for the shares Nvidia (NASDAQ: NVDA) Since they hit the all-time high last November. At the beginning of the year, they fell into general market weakness as investor sentiment shifted to risk-off. Since then rising inflation prints and high interest rates, combined with the Russian aggression in Ukraine, have made one of the best growth stocks of the past year even brighter. But despite the 25% drop so far this month, there are a few reasons to think now might be a good time to start picking up some shares of Nvidia.
For starters, the recent sell-off has opened up risk-reward profiles and created a potentially difficult buying opportunity. At least those who were thinking from New Street Research yesterday upgraded their ratings to buy stocks from neutral yesterday. Analyst Pierre Ferragu pointed to Nvidia’s attractive valuation and the possibility of a strong outlook for its datacenter business. He further added that the fall in cryptocurrency prices is no longer a reason to avoid stocks, adding in a note to clients that “any vulnerabilities driven by crypto will be limited, short-lived, and only an opportunity to add position.”
Its $ 280 price target, above $ 250, makes for a compelling reading in the light where the stock closed last night. At just 20 220 per share, Ferragu is calling for a nearly 30% increase from current prices. Also, Ferragu highlighted the possibility that Nvidia “continues to see its datacenter business strength” as well as it is trading 36 times the 2025 estimate at $ 7.80 per share and the Philadelphia Semiconductor Index is only 2.2 times.
The bullish outlook echoed earlier remarks by Bank of America, which noted that “shares have recently sold out due to concerns about slower growth, but this seems to have become excessive.” Bank of America analyst Vivek Arya has maintained its buy rating and its 375 price target. Considering the stock tapped out at an all-time high of $ 345 last year, the proposed 70% rise here should be enough to entice more risk-averse investors.
Aryan added in a note that “we see Nvidia as one of the most important growth companies in the semifinals, possibly due to its ability to increase sales in technology at 20-25% CAGR (3x semis industry). Industry maintains growth of 45% + EBIT [margins]”
These new voices at Bull Camp will be much appreciated by Nvidia trustees, especially in light of the downgrade that hit shares earlier in the week. You don’t often see that some well-known sales-like names are in the opposite position at the same time, but that happened on Monday when Baird’s team downgraded Nvidia. Concerns over the cancellation of orders and the slowdown in PC growth were behind the decision to move the stock to a neutral rating, with the trimmed price target of $ 225.
Although Baird analyst Tristan Zerra is not yet a fully developed bear, he acknowledges that data center trends are still “very strong”. At the same time, however, year-over-year earnings are likely to peak in the first half of 2022, and gaming-related earnings are likely to weaken for the rest of the year. It remains to be seen how the stock will perform throughout 2022, but in terms of equilibrium it seems that more things are going in its favor than its opponents.
In addition to the basic strengths mentioned above, technical reasoning is also quite powerful. Nvidia shares have returned to a much-tested line of support at $ 215, a level where they have already found buyers several times this year. If they can muster another defense of that level next week, you have to think that they will return to the North again. After failing to break them once more, the bears may decide to throw away the towel, and it is well understood that the bulls are arguing 30% or even 70% the opposite.
NVIDIA is part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and operated by entrepreneurs.