- NVIDIA stock has formed a cup-and-handle pattern and retested its upper side.
- The company has become a bargain as it trades at a 25x forward PE multiple.
- Technicals and its strong fundamentals suggest that the company has more upside ahead.
NVIDIA stock price has pulled back in the past few days, moving from a record high of $236 to the current $212. It has formed a textbook cup-and-handle and a break-and-retest pattern, pointing to more gains in the coming months. If this happens, the NVDA stock price will go parabolic in the coming months.
NVIDIA Stock Price Just Formed a Break-and-Retest Pattern
The daily chart shows that the NVIDIA stock price surged from $164.25 on March 20 to a record high of $236. It formed a giant cup-and-handle pattern, one of the most popular bullish signs in technical analysis. This pattern consists of a rounded bottom and a pullback at the top.
In most cases, this pattern normally leads to a strong bullish breakout over time. After the initial breakout, an asset typically drops and retests its upper level, as has happened.
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This cup has a depth of 22%. Measuring the same distance from the cup’s upper side gives it a target price of $260. A move above that level will signal more upside, potentially reaching $300 in the near term. Such a move would push the company’s market capitalization to $7.32 trillion.
NVIDIA is a $5.3 Trillion Bargain
NVIDIA’s market capitalization has jumped to over $5.3 trillion amid the ongoing artificial intelligence (AI) supercycle. While this valuation may signal that it is highly overvalued, the reality is that the company is extremely cheap.
Let’s start with its revenue and profitability growth. The most recent numbers showed that the company generated over $81 billion in revenue in the first quarter of the year, and management expects to generate $91 billion in the current quarter. This year’s revenue will likely be near $400 billion, a notable amount for a company that made $22 billion in 2022.
NVIDIA has room to hit over $1 trillion in annual revenue in the coming years. Estimates are that it will cross this milestone by 2030. With a 55% profit margin, it will make over $500 billion in profit.
Data shows that NVIDIA has a forward price-to-earnings ratio of 25, slightly above the S&P 500 Index average of 23. This is a good number for a company whose revenue is surging by over 50%.
Most importantly, the company has some potential catalysts that will drive its stock higher in the coming years. One of them is the upcoming launch of its Central Processing Unit (CPU) product. CPUs are expected to see a boom in the coming years due to the ongoing growth of AI agents. Jensen Huang believes the business will be worth more than $200 billion over time.
The company also has a Chinese catalyst, as the Trump administration recently allowed ten companies, including Alibaba and Tencent, to buy its H200 chips. Analysts expect that this business will generate billions of dollars in annual revenue over time.
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