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This year, technology stocks have suffered greatly from rising interest rates and rising inflation. Nvidia (WKN: 918422 / ISIN: US67066G1040) was one of the stock market stars that fell particularly low. Also because the expectations of graphics processor specialists were very high upstream. Despite the current drop in prices, the group should have potential in the medium to long term.
“Corona profiteers” under pressure
One of the reasons for the positive outlook could be the fact that Nvidia is dealing with many different growth areas. These include, for example, data centers, the gaming segment, the metaverse or artificial intelligence. However, short-term stressors must be included in the current analysis.
These include the economic downturn, the PC market under pressure, and the short-term downturn in the gaming industry. In any case, it has recently affected many sectors or companies that were temporarily considered so-called “Corona profiteers”. The demand should normalize here.
Added to this is the fact that Nvidia is, to some extent, at the center of the trade dispute between the United States and China. The US government wants to prevent chips from being sent to China that could be used for military purposes. Of course, this hurts business in China, which is important to Nvidia.
Cathie Wood shakes things up
Cathie Wood’s stock sales have recently generated additional excitement. With her investment company Ark Invest, she mainly focuses on the technology sector. Nvidia is also one of its long-time favorites. Investors became all the more alert when Bloomberg reported that Wood’s flagship ETF, Ark Innovation, sold 167,914 Nvidia shares on November 4, after 50,252 shares had already been sold on October 20. On November 3, 24,423 Nvidia shares were again sold through the Ark Next Generation Internet ETF.
Earlier this year, Woods sold Nvidia stock shortly before the quarterly earnings announcement and was right to assume the company would produce negative headlines. Results for the October quarter were ultimately mixed, while Wood is far from getting rid of Nvidia despite the tentative stock sale. Ark funds held more than 1.38 million Nvidia shares at the end of September, according to Bloomberg. In addition, positions were sometimes increased in October.
light and shadow
In the third quarter of the 2022/23 financial year (ending October 30), Nvidia exceeded sales expectations, but disappointed on the results side. Revenue fell 17% year-over-year to $5.9 billion. Adjusted earnings per share fell 50% to $0.58. On average, analysts had expected revenue of $5.77 billion with EPS of 69 cents, according to Refinitiv.
However, management was also disappointing in terms of revenue in the current quarter of the current fiscal year. A value of US$6.0 billion is expected here, while market participants had previously imagined a value of US$6.09 billion. The group recently had to deal with inventories, among other things. These were caused, among other things, by a drop in demand in China in the field of data centers.
Analysts do not let go of Nvidia
Despite mixed results, Raymond James analyst Melissa Fairbanks maintained her “strong buy” view on the Nvidia stock case. However, the price target has been lowered from $210 to $190. There would be further challenges for Nvidia – for example in the form of further inventory reduction. However, the fact that data center activity is now almost 2.5 times greater than gaming activity is seen as a positive.
Susquehanna analyst Christopher Rolland, meanwhile, believes some new product lines slated for January should provide some momentum. For UBS analyst Timothy Arcuri, the latest numbers were no reason to change anything to the “buy” rating of Nvidia shares or the $200 price target.
Like many other tech stocks, Nvidia is going through a rough patch. Due to its focus on growth markets such as data centers, AI or the metaverse, the group should have medium and long-term potential. It’s not for nothing that Ray Wang, principal analyst and founder of Constellation Research, a Silicon Valley-based technology research and advisory firm, told Yahoo Finance Live that he believes Nvidia is on the rise. intersection of AI, the metaverse, and… the future of computing would sit.
Nvidia is represented in many future markets. Including in the Metaverse area. If you want to bet on a basket of companies that should benefit from the development of the Metaverse, take a look at the Metaverse Index® Shareholder Index Certificate (WKN: DA0AB9 / ISIN: DE000DA0AB97).
Image source: NVIDIA press photo
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