NVIDIA Corporation (NASDAQ:NVDA) stock has had significant correction since its all-time highs. Is NVDA stock a good buy now?
One of the hottest stock's of this year, Jensen Huang led GPU major NVIDIA Corporation (NASDAQ:NVDA), has seen a notable correction over the last few days, losing more than 13% from its all-time highs. The rotation in the market also contributed to for the NVIDIA shares' recent losses. With many of the Wall Street firms sounding warnings bells to their clients suggesting them to ease their holdings in growth names of 2017, the question now is whether there is more correction ahead for NVDA stock, or, will it bounce back? The tax reforms will also not likely benefit the San Jose, California based semiconductor company. Is NVIDIA stock still a good buy with valuation concerns also affecting investor sentiment?
The answer to the question whether NVIDIA shares could be partly answered by looking at the NVDA stock technical chart. In the last trading session, the stock showed some signs of bounce as it seems to have found support at its 100-day simple moving average (SMA). NVIDIA shares managed to close above its 100-day SMA even after going below the trend line during the course of the day. As can be seen in the technical chart, the 100-day SMA has been a very strong support level for the stock, with the stock trading above the trend line for the majority of 2017 and falling below it for only a brief period. Further, the GPU giant's stock is in the oversold zone as per both popular momentum indicators Bollinger Bands and Relative Strength Index (RSI). The share price has breached the lower Bollinger Band and the current RSI reading of 25.46, is below the generally oversold threshold limit of 30, to suggest the NVDA stock is oversold. So, it is likely that the stock will soon bottom out and a bounce is around the corner.NVIDIA's future growth driver: AI credentials get stronger.
NVIDIA's data center segment had hit an annual run rate of $2 billion in the latest quarter and is showing no signs of slowing down. The data center segment which also constitutes AI chips revenue is continuing its extraordinary triple-digit growth rate. We at Amigobulls have highlighted the importance of NVIDIA's AI credentials in our past coverage. Now, its AI credentials have gotten even stronger with IBM (NYSE:IBM) Power9 chip built for AI and machine learning. This chip has been built in partnership with the Jensen Huang led company and makes use of NVIDIA's latest Tesla V100 Volta chips. A recent report highlighted the opinion of Patrick Moorhead, principal analyst at Moor Insights & Strategy, who believes that IBM has done very well to differentiate itself from the competition with this chip and said "IBM’s Power9 is literally the Swiss Army knife of ML acceleration as it supports an astronomical amount of IO and bandwidth, 10X of anything that’s out there today." With Gartner predicting that by 2019 deep learning will be almost a must for achieving advancements in almost all technologies from image recognition and natural language processing to fraud detection, medical research and product recommendation, NVIDIA's growth prospects look great and make NVDA stock still a good long-term buy irrespective of the recent sell-off.NVIDIA features in the Top 10 of Drucker Institute's Management Top 250 ranking.
NVIDIA made it to the Drucker Institute's Management Top 250 ranking for the most effectively managed company. The company features at the 10 position in the rankings on most metrics which houses other tech giants like Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN). The effectiveness of the management can also be seen in the company's financial results as well as the stock performance. The rankings are based on the core principles of Peter Drucker ( often applauded as the father of modern management) like customer satisfaction, employee engagement and development, innovation, social responsibility and financial strength. This is another indication that the fundamental story of NVIDIA has not changed and the recent sell-off could mostly be a case of rotation in the market and profit booking. NVIDIA's long-term growth story still remains intact.Bottomline.
Investors shouldn't get worried about the recent correction in NVIDIA stock as the fundamentals of the company have not changed. But it would be prudent for investors to be little cautious. NVIDIA stock presently trades at 39 times the forward earnings and 12 times the sales, which might be little expensive for some. However, we must also take NVIDIA's rapid growth and massive growth opportunities in the AI and autonomous driving space. The stock is likely to see little volatility in near-term before consolidating. Investors would be better off to monitor the charts closely before planning to make use of the recent correction to go long on NVIDIA shares. Still, the majority of the Wall Street is bullish on NVIDIA with 21 out of 38 analysts having a buy or strong buy rating and with only 5 with sell or underperform rating.
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