NVIDIA stock price has plunged into a local bear market today. It dropped to $192 in the pre-market session, down 20% from its year-to-date high. This retreat has wiped out billions of dollars in value as its market capitalization has plunged from $5.74 trillion to $4.73 trillion. Still, history suggests the stock is poised for a comeback, supported by key fundamental and technical catalysts.
Nvidia Stock Forecast: Technicals Suggest a Rebound is Near
One of the key catalysts for Nvidia’s rebound is its strong technicals. The daily chart suggests that, despite its retreat, the stock remains above the 200-day Exponential Moving Average (EMA). In most cases, this level usually provides it with substantial support. A clear break below it would be a sign that bears have prevailed.
At the same time, the stock has formed a highly bullish falling wedge pattern, which consists of two converging trendlines. The two lines are now nearing their convergence, suggesting a bullish breakout may be on the way.
If this happens, the stock will likely soar to the all-time high of $236. A break above that level will signal that there are still more buyers left in the market who are keen to buy the shares. Such a move will push it to the next psychological level of $300.
Nvidia is Highly Undervalued
The other key reason why the NVDA stock price may be ripe for a strong bullish breakout is that it has become a bargain in most measures. Starting with its multiples, we see that the stock has a forward price-to-earnings ratio of 21.7, lower than the sector median of 25 and the five-year average of 43. On a GAAP basis, its forward multiple is 20, also lower than its five-year average of 53.
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The same is true when using the Rule-of-40 metric, which considers a company’s revenue growth and its margins. Nvidia has a revenue growth of 70 and a net profit margin of 54%, giving it a multiple of 124%. Companies are considered undervalued when their multiples exceed 40%.
A Discounted Cash Flow (DCF) calculation by Simply Wall St. shows that the ideal stock price is $219, suggesting that the stock is a 11% bargain.
All Signs Are That Nvidia’s Growth Is Accelerating
Meanwhile, there are signs that the company’s growth is supercharging. The last financial results showed that its revenue jumped by 81% in the first quarter, with management guiding to $90 billion in Q2 revenue. Analysts predict that its revenue jumped by 96% to $91.7 billion and that its annual figure will reach nearly $400 billion. It is expected to make $554 billion next year. These are strong numbers for a company that has high margins.
Meanwhile, top AI companies that have published their results have shown strong growth. Micron’s revenue jumped by over 300%, while Samsung’s revenue more than doubled. Its profit soared by over 1,800%. In a recent note, Hon Hai, a top Nvidia supplier, also reported strong results and raised its outlook.
Nvidia also has other catalysts that will fuel its growth. It has launched Vera, its CPU, which is expected to be popular, and has started shipping its chips to China.
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