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Why NVIDIA (NVDA) May Be a Good Bet Amid Recent Sell-Off
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NVIDIA Corporation (NVDA - Free Report) is one stock investors may consider adding to their portfolio to shrug off the impacts of the current highly volatile market environment and make some gains from its upside potential.
The year so far has been highly volatile for the U.S. stock market with the global economy going through a massive slowdown due to the macroeconomic and geopolitical environment. Year to date, the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 have plunged 8.4%, 15.3% and 10.3%, respectively.
The ongoing Russia-Ukraine war has further increased worries for investors who were already concerned about global economic recovery due to increasing crude oil prices, rising inflation and a hawkish policy adopted by the Fed.
The aforementioned global macroeconomic and geopolitical uncertainties are likely to continue weighing on investor sentiments, which could result in more volatility in the U.S. equity market.
Nonetheless, this volatility has also created buying opportunities for investors. In the current scenario, investors can look for stocks with strong fundamentals that can stay afloat and grow once the impact of the aforementioned global macroeconomic and geopolitical uncertainties cools off.
NVIDIA is one such stock in our opinion.
Why an Attractive Pick?
Share Price Decline & Reduced Valuation Multiple: Shares of NVIDIA have plunged 21.7% in the year-to-date (YTD) period, while the stock is down 33.6% from its 52-week high level of $346.47 attained on Nov 22, 2021, making the stock more affordable for investors. The stock trades at a one-year forward P/E of 45.1X compared with its five-year average of 82.02X.
Year-To-Date Price Performance
Image Source: Zacks Investment Research
Solid Rank & Growth Score: NVIDIA currently carries a Zacks Rank #1 (Strong Buy) and has a Growth Score of B. Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 or #2 (Buy), offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Northward Estimate Revisions: Of the 13 analysts covering the stock, 12 have raised their earnings estimates for fiscal 2023 over the past 30 days versus no southward revisions, reflecting analysts’ confidence in the company. Over the same period, the Zacks Consensus Estimate for the current fiscal year has moved 7.8% north.
Positive Earnings Surprise History: NVIDIA has an impressive earnings surprise history. The company outpaced estimates in the trailing four quarters, delivering an average earnings surprise of 7%.
Solid Growth Prospects: The Zacks Consensus Estimate of $5.56 for fiscal 2023 earnings suggests growth of 25.2% from the year-ago reported figure. Moreover, earnings are expected to register 14.7% growth in fiscal 2024 and reach $6.37 per share. Its projected long-term earnings per share growth rate is 16.8%.
Robust Fundamental Growth Drivers: NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit (GPU).
The graphic chip maker is benefiting from the coronavirus-induced work-from-home and learn-at-home wave. The company has been witnessing solid demand for GeForce desktop and notebook GPUs, which are boosting gaming revenues.
Moreover, a surge in Hyperscale demand is a tailwind for the company’s Data Center business. As more businesses shift to the cloud, the need for datacenters is increasing immensely. To cater to this huge demand, datacenter operators are expanding their operations, which is driving the demand for GPUs.
NVIDIA GPUs are also gaining rapid traction with the proliferation of artificial intelligence (AI). The increasing use of AI tools in datacenter, automotive, healthcare and manufacturing industries is expected to drive the demand for GPUs in the long haul.
Expansion of NVIDIA GeForce NOW is expected to drive user base. Further, the solid uptake of AI-based smart cockpit infotainment solutions is a boon.
The company is also working with more than 320 automakers, tier-one suppliers, automotive research institutions, HD mapping companies and start-ups to develop and deploy AI systems for self-driving vehicles.
Other Stocks to Consider
Some other stocks from the semiconductor industry worth considering amid the current market environment are Advanced Micro Devices (AMD - Free Report) , ON Semiconductor (ON - Free Report) and Micron Technology (MU - Free Report) .
Advanced Micro Devices currently sports a Zacks Rank #1 and has a Growth Score of A. The Zacks Consensus Estimate for first-quarter 2022 earnings has been revised upward by 33.8% to 91 cents per share over the past 60 days. For 2022, earnings estimates have moved upward by 71 cents to $3.99 per share over the past 60 days.
Advanced Micro Devices’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 17%. Shares of AMD have declined 23.1% in the YTD period.
ON Semiconductor sports a Zacks Rank #1 and has a Growth Score of A at present. The Zacks Consensus Estimate for ON’s first-quarter 2022 earnings has been revised upward to $1.04 per share from 82 cents 30 days ago. For 2022, earnings estimates have been revised upward by 26.8% to $4.16 per share in the past 30 days.
ON Semiconductor’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 16.3%. Shares of ON are down 14% YTD.
Micron currently carries a Zacks Rank #2 and has a Growth Score of A. The Zacks Consensus Estimate for second-quarter fiscal 2022 earnings has remained unchanged over the past 30 days at $1.95 per share. For fiscal 2022, earnings estimates have moved upward by 4 cents to $8.95 per share in the past 30 days.
Micron’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 5%. MU stock has lost 14.8% of its market value in the year so far.
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Why NVIDIA (NVDA) May Be a Good Bet Amid Recent Sell-Off
NVIDIA Corporation (NVDA - Free Report) is one stock investors may consider adding to their portfolio to shrug off the impacts of the current highly volatile market environment and make some gains from its upside potential.
The year so far has been highly volatile for the U.S. stock market with the global economy going through a massive slowdown due to the macroeconomic and geopolitical environment. Year to date, the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 have plunged 8.4%, 15.3% and 10.3%, respectively.
The ongoing Russia-Ukraine war has further increased worries for investors who were already concerned about global economic recovery due to increasing crude oil prices, rising inflation and a hawkish policy adopted by the Fed.
The aforementioned global macroeconomic and geopolitical uncertainties are likely to continue weighing on investor sentiments, which could result in more volatility in the U.S. equity market.
Nonetheless, this volatility has also created buying opportunities for investors. In the current scenario, investors can look for stocks with strong fundamentals that can stay afloat and grow once the impact of the aforementioned global macroeconomic and geopolitical uncertainties cools off.
NVIDIA is one such stock in our opinion.
Why an Attractive Pick?
Share Price Decline & Reduced Valuation Multiple: Shares of NVIDIA have plunged 21.7% in the year-to-date (YTD) period, while the stock is down 33.6% from its 52-week high level of $346.47 attained on Nov 22, 2021, making the stock more affordable for investors. The stock trades at a one-year forward P/E of 45.1X compared with its five-year average of 82.02X.
Year-To-Date Price Performance
Image Source: Zacks Investment Research
Solid Rank & Growth Score: NVIDIA currently carries a Zacks Rank #1 (Strong Buy) and has a Growth Score of B. Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 or #2 (Buy), offer the best investment opportunities for investors. Thus, the company appears to be a compelling investment proposition at the moment. You can see the complete list of today’s Zacks #1 Rank stocks here.
Northward Estimate Revisions: Of the 13 analysts covering the stock, 12 have raised their earnings estimates for fiscal 2023 over the past 30 days versus no southward revisions, reflecting analysts’ confidence in the company. Over the same period, the Zacks Consensus Estimate for the current fiscal year has moved 7.8% north.
Positive Earnings Surprise History: NVIDIA has an impressive earnings surprise history. The company outpaced estimates in the trailing four quarters, delivering an average earnings surprise of 7%.
Solid Growth Prospects: The Zacks Consensus Estimate of $5.56 for fiscal 2023 earnings suggests growth of 25.2% from the year-ago reported figure. Moreover, earnings are expected to register 14.7% growth in fiscal 2024 and reach $6.37 per share. Its projected long-term earnings per share growth rate is 16.8%.
Robust Fundamental Growth Drivers: NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit (GPU).
The graphic chip maker is benefiting from the coronavirus-induced work-from-home and learn-at-home wave. The company has been witnessing solid demand for GeForce desktop and notebook GPUs, which are boosting gaming revenues.
Moreover, a surge in Hyperscale demand is a tailwind for the company’s Data Center business. As more businesses shift to the cloud, the need for datacenters is increasing immensely. To cater to this huge demand, datacenter operators are expanding their operations, which is driving the demand for GPUs.
NVIDIA GPUs are also gaining rapid traction with the proliferation of artificial intelligence (AI). The increasing use of AI tools in datacenter, automotive, healthcare and manufacturing industries is expected to drive the demand for GPUs in the long haul.
Expansion of NVIDIA GeForce NOW is expected to drive user base. Further, the solid uptake of AI-based smart cockpit infotainment solutions is a boon.
The company is also working with more than 320 automakers, tier-one suppliers, automotive research institutions, HD mapping companies and start-ups to develop and deploy AI systems for self-driving vehicles.
Other Stocks to Consider
Some other stocks from the semiconductor industry worth considering amid the current market environment are Advanced Micro Devices (AMD - Free Report) , ON Semiconductor (ON - Free Report) and Micron Technology (MU - Free Report) .
Advanced Micro Devices currently sports a Zacks Rank #1 and has a Growth Score of A. The Zacks Consensus Estimate for first-quarter 2022 earnings has been revised upward by 33.8% to 91 cents per share over the past 60 days. For 2022, earnings estimates have moved upward by 71 cents to $3.99 per share over the past 60 days.
Advanced Micro Devices’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 17%. Shares of AMD have declined 23.1% in the YTD period.
ON Semiconductor sports a Zacks Rank #1 and has a Growth Score of A at present. The Zacks Consensus Estimate for ON’s first-quarter 2022 earnings has been revised upward to $1.04 per share from 82 cents 30 days ago. For 2022, earnings estimates have been revised upward by 26.8% to $4.16 per share in the past 30 days.
ON Semiconductor’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 16.3%. Shares of ON are down 14% YTD.
Micron currently carries a Zacks Rank #2 and has a Growth Score of A. The Zacks Consensus Estimate for second-quarter fiscal 2022 earnings has remained unchanged over the past 30 days at $1.95 per share. For fiscal 2022, earnings estimates have moved upward by 4 cents to $8.95 per share in the past 30 days.
Micron’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 5%. MU stock has lost 14.8% of its market value in the year so far.