A glance at Nvidia’s (NASDAQ:NVDA) recent stock trajectory might give off a vibe of concern, leading some to believe that the hardware giant has reached its peak. Its shares have remained static, hovering around the $125 mark for the past month. But don’t be deceived by what seems like a plateau. It might just be the calm before the next bull run.
This perceived stagnation may trigger the idea that Nvidia’s stock, after its considerable rally, is headed for a less impressive period of price appreciation. However, such conclusions may be premature. The underlying fundamentals of the AI chip leader suggest that the path to higher share price levels, both within this year and beyond, remains clear.
Indeed, Nvidia’s meteoric rise over the last eighteen months could have investors second-guessing the significance of its recent price action. But the current flat movement is not necessarily a harbinger of a fall. Instead, it could be attributed to a more benign reason – the Wall Street summer doldrums, a time period from Memorial Day to Labor Day characterized by reduced stock market activity.
Apart from seasonality, other factors may contribute to the current state of Nvidia’s shares. For instance, the market has already absorbed Nvidia’s latest earnings report, and the next one isn’t due until around August 21. The lull isn’t necessarily indicative of impending doom; on the contrary, it could be setting the stage for the next major breakout.
Nvidia has an impressive track record, with robust levels of year-over-year earnings and revenue growth since 2023. Interestingly, this growth may not have been fully factored into Nvidia stock’s valuation. As demonstrated in the most recent quarterly results, earnings for the quarter ending April 28, 2024 showed a whopping 461% increase. But the shares only climbed 193%, from a split-adjusted $29 to $85.
Investors have certainly priced in Nvidia’s initial AI chip growth spree, and considered the potential for a slowdown. However, even if growth continues at a slower pace, Nvidia’s becoming “cheaper” on a valuation basis creates room for substantial share gains.
The forthcoming unveiling of Nvidia’s quarterly results could instigate the next significant surge. If the results and guidance meet or surpass expectations, and the market responds positively to the launching of the Rubin next-gen AI chip platform, Nvidia’s growth outlook for this fiscal year and the next could spark a notable jump in share prices.
Market predictions for Nvidia’s earnings are varied, but the Q2 FY 2025 earnings release in August might trigger a significant upward revision, perhaps even to the highest end of forecasts. This predicts an annual earnings per share for this fiscal year of $4, potentially nearing $5. By 2025, it might be evident that EPS could hit $6, $7, or more within two fiscal years.
This trajectory suggests Nvidia’s comeback above its $140 per share peak, possibly even reaching over $200 per share. The recent performance of Nvidia stock shouldn’t deter investors. With an end to the summer slump potentially in sight, seizing the opportunity to secure this AI champion could be a smart move.
To note, as of this article’s publication, Louis Navellier held a long position in NVDA. No other party involved in the creation of this article holds any positions in the securities discussed.
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