Buy Signal on Nvidia Corporation (NVDA-US)
Our system also triggered an Enter Long signal on March 18, 2022. Nvidia has a rather positive track record with a behavorial score of 6/10, therefore we consider the signal as mainly long term.
Nvidia is a $ 661 Bn market cap and the world leader in the design and development of programmable graphics processors. The group also develops associated software (ForceWear brand). Revenues are mainly derived from computer processors (87% of sales) including processors for graphics and multimedia (GeForce, Personal Cinema, Quadro brands, etc.), storage and security (nForce) for computers, servers, work stations, etc.
The second segment consists in mobile processors (13% of sales), mainly processors that integrate the functions of image capture, video reading, and games for mobile telephones, portable game consoles, etc. and marketed under the GoForce name. Revenues by industry are split between gaming (50%), data storage (27%), professional visualization (11%), automotive (6%) and other (5%).
Nvidia stock, as the whole Technology sector, experienced a significant correction of 40% since 22 November 2021 peak of $346. Valuation is still demanding (12 month forward P/E at 59x), but is backed by impressive EPS growth and strong leadership position.
Revenues are expected to grow by 30% in 2022 to $34.7 Bn coupled with a 47.6% operating margin and a $ 11 Bn net profit. Pre-tax profits are expected to grow by 30% in the next 3 years. The net cash position is expected to reach $ 16 bn at the end of 2022.
Nvidia has abandoned the acquisition of U.K.-based chipmaker ARM, due to regulatory hurdles, therefore the company could use its considerable cash resources to carry out a massive share buy back.
The company has sound prospects in Gaming, Storage, AI and Metaverse. The consensus may be too conservative for 2022, and there is possibly room for EPS upward revision.
Short term catalyst : Strong prospects, potential share buyback.
This signal is consistent with the short term reversal (bullish tactical signal) in the US Semiconductors sector, while there is currently 30% of US semiconductors stocks in bullish tactical signal and only 9% in bullish strategic signal .