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NVIDIA Stock Gains Ground As Analysts See More Upside
Shares of NVIDIA gained strong upside momentum and tried to get above the $775 level despite the weakness of the general market after the stock was upgraded by Jefferies with a price target of $854.
NVIDIA stock was very strong in June as traders continued to bet on the semiconductor sector. Earnings estimates have been also moving higher in recent weeks, which provided additional support to the stock.
Currently, analysts expect that NVIDIA will report earnings of $15.73 per share in the current year. Next year, earnings are projected to increase to $17.16 per share, so the stock is trading at almost 45 forward P/E.
This is a rich valuation, but the stock managed to move higher even when the market became worried about potential rate hikes in 2022 – 2023.
What’s Next For NVIDIA?
Technically, NVIDIA shares are overbought, and the risks of a pullback are increasing. Fundamentally, the stock is trading at a rich valuation but the market is ready to pay a rich premium for companies with solid potential in the current environment. For example, Tesla stock trades at roughly 100 forward P/E.
It remains to be seen whether the market will pay any attention to risks of higher rates which can put more pressure on tech stocks. At this point, Treasury yields are declining despite recent commentary from the Fed, which is bullish for tech stocks including NVIDIA.
The market will continue to wait for the ARM merger which is facing some regulatory delays. However, the market remains optimistic that the merger will be approved, which is bullish for the stock.
In the near term, NVIDIA shares may pull back due to technicals and lofty valuation, but the stock’s long-term upside trend and the fundamentals behind it remain strong.
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This article was originally posted on FX Empire