NVIDIA Stock Price Forecast August 2021 – Time to Buy NVDA?
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With a year-to-date gain of 45%, Nvidia is among the top 30 gainers of the S&P 500. It is among the few stocks that have outperformed in 2020 as well as 2021.
While NVDA stock is now down over 8% from its 52-week highs, it was trading higher in premarkets today after markets gave a thumbs up to its quarterly earnings. What’s the forecast for NVIDIA stock in August 2021 and is it a good buy now?
NVIDIA reported strong fiscal second-quarter earnings
NVIDIA reported its earnings for the fiscal second quarter yesterday after the close of markets. The company posted revenues of $6.51 billion in the quarter which were ahead of the $6.33 billion that analysts were expecting. The revenues increased 68% as compared to the corresponding period in 2020. Looking at the business segments, the company reported Gaming revenues of $3.06 billion which were 85% higher than the corresponding quarter last year. Its Data Center revenues also increased 35% to $2.37 billion over the period.
Meanwhile, CMP, which is NVDA’s cryptocurrency chip product, reported sales of $266 million which were below the $400 million that it had previously forecast. NVIDIA reported an adjusted EPS of $1.04 in the quarter which was higher than the $1.01 that analysts were expecting. The metric rose 89% as compared to the corresponding quarter last year.
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NVDA provides guidance
NVDA said that it expects to post revenues of $6.80 billion in the current quarter with a variance of 2% on both sides. It expects an adjusted gross margin between 66.5-67.5% in the quarter. The company also provided an update on the Arm Holdings acquisition that it had announced last year. The deal has been facing regulatory scrutiny especially in the UK where Arm is based.
NVIDIA-Arm acquisition
It said, “We believe more than ever in the power of our combination and the benefits it will deliver for Arm for the UK and for its customers across the world in the era of AI.” In an apparent bid to show its support for the UK amid the opposition to the Arm deal, the company has said that it plans to invest in the country and make it “a global center in science, technology and AI (artificial intelligence).
Commenting on the regulatory scrutiny, NVIDIA said “We are working through the regulatory process, although some Arm licensees have expressed concerns and objected to the transaction. And discussions with regulators are taking longer than initially thought. We are confident in the deal and that regulators should recognize the benefits of the acquisition to Arm, its licensees and the industry.”
NVIDIA stock forecast
Most Wall Street analysts are bullish on Nvidia stock. Of the 41 analysts covering the stock, 34 have a buy rating while five rate them as a hold. The remaining two analysts have a sell or equivalent rating on NVDA stock. The stock has a median target price of $213.50 which is a premium of over 12% over current prices. The stock trades 42% above its street low target price of $110 while the street high target price of $250 implies an upside of over 31% over current prices.
Before NVIDIA’s earnings release yesterday, Citi reiterated its buy rating on the stock. “We expect in-line results with data center beat and lower gaming vs Street based on supply chain commentary. … We believe investor focus remains on the data center primarily with expectations of low teens sequential growth in the Oct-Q,” said Citi analysts in their note.
Analyst action
Earlier this month, Rosenblatt raised NVDA’s target price to a street high of $250 highlighting the “best-in-class AI play with growth vectors into next generation networking/DPU (data processing unit) adoption and early-days of autonomous driving software kicker.”
Notably, the autonomous car industry would require a lot of high-quality chips, just like electric cars. NVIDIA is positioning itself to gain a strong position in the market. During the fiscal second quarter, it announced that Self-driving startup AutoX is using NVIDIA DRIVE for level 4 autonomy.
NVIDIA stock long term forecast
Autonomous driving is a positive long-term driver for NVDA stock. The chip shortage situation is also expected to continue at least into 2022. Also, the digital transformation and growing gaming demand bode well for NVIDIA stock in the long term. The stock looks a good ancillary play on the digital transformation.
NVDA stock technical analysis
NVDA stock recently fell below the 50-day SMA (simple moving average) which is a bearish indicator. However, the stock could rise above the trendline in today’s price action looking at the pre-market trading. The stock trades above the 100-day and 200-day SMA. The 14-day RSI (relative strength index) of 42.7 is a neutral indicator and signals neither overbought nor oversold positions. However, the MACD (moving average convergence divergence) gives a sell signal.
Looking at the valuations, NVIDIA stock trades at an NTM (next-12 months) PE multiple of 47.3x which is higher than the historical averages. That said, it is among the tech companies that have seen a structural rerating over the last year.
More analysts could take a positive view of the stock after its second-quarter earnings. Overall, NVDA stock looks like a good stock to buy for the long term and a play multiple themes from chip shortage, gaming, and autonomous driving.
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