VCAR - Does Nvidia remain a buy after its earnings blowout?

2023-05-31 14:56:08 ET

Shares of Nvidia ( NASDAQ: NVDA ) exploded last week after the semiconductor firm announced a blockbuster earnings report that included an optimistic forecast, led by demand for AI-related technology. Since the report, shares of the semiconductor firm rocketed higher by roughly 32% .

Given this surge, does the stock still have significant near-term upside? Do the prospects for AI make the stock a buy, even after its post-earnings advance?

Nvidia’s Earnings

Nvidia's ( NVDA ) surge followed the release of Street-beating earnings . Specifically, the company posted non-GAAP EPS of $1.09, which beat analyst estimates by $0.17. The company also disclosed revenue of $7.19B -- a figure that was more than 13% below the previous year but still well above analysts' consensus.

The firm's outlook provided the main impetus for the stock advance. NVDA predicted second-quarter revenue to be $11B, plus or minus 2%, well above the $7.18B analysts were projecting.

As part of its forecast, NVDA added that it is "significantly" increasing its supply for products related to its data center business. This push comes amid growing interest around artificial intelligence.

Following the earnings announcement, NVDA jumped more than 24% in a single session and extended its gains in the following sessions. The stock reached a 52-week high of $419.38 before moderating a bit, slipping about 3% in Wednesday's intraday trading to reach a level around $385.

Overall, NVDA has climbed more than 160% since the end of 2022.

Is NVDA a Buy?

The overwhelming majority of Wall Street experts believe that Nvidia ( NVDA ) remains a clear Buy. Of the 48 analysts surveyed over the last 90 days, 30 of them state that Nvidia is a Strong Buy. Another 10 analysts see the company as a Buy, meaning around 83% of those surveyed hold a bullish outlook.

Among the remaining analysts, seven view NVDA as a Hold and one analyst believes the organization is a Sell. Meanwhile, the average target for NVDA is $426.59, with a high-end target of $600 a share and a low-end target of $206 a share.

Seeking Alpha's Quant Ratings system views NVDA with a little more skepticism, labeling the stock as a Hold. Valuation represents the key headwind, according to the system of grading quantitative measures. The Quant Ratings give NVDA an F for valuation.

On the positive side, SA's Quant Ratings graded NVDA as an A+ for momentum and profitability. Meanwhile, the firm gets an A for growth.

See a breakdown below:

What Others Say

While many are optimistic about shares of Nvidia, not all feel the same way. Seeking Alpha analyst Stuart Allsopp says the stock is a Sell , stating: “Despite potential growth, current valuations make the stock overvalued and echo the late-1990s tech bubble.”

At the same time, fellow SA analyst Hunting Alpha noted that it missed the Nvidia move and now sees the stock as a Hold , saying: “I don't think it is wise to chase it now. I have a neutral/hold stance as I consider both the bullish and bearish drivers.”

Other Options

For those who feel that Nvidia ( NVDA ) may be overextended after its recent surge, there remain other options in the semiconductor space. Competitors include such names as Advanced Micro Devices ( AMD ), Taiwan Semiconductor Manufacturing Company ( TSM ), Broadcom ( AVGO ) and Texas Instruments ( TXN ).

At the same time, investors also can access shares of Nvidia through a more diversified approach by turning to exchange traded funds. NVDA is held by 410 ETFs but the five ETFs that hold the heaviest weighting include the following:

• ProShares Ultra Semiconductors ( USD ): 25.39% allocation.
• VanEck Semiconductor ETF ( SMH ): 17.51% allocation.
• AXS Esoterica NextG Economy ETF ( WUGI ): 16.74% allocation.
• Simplify Volt RoboCar Disruption and Tech ETF ( VCAR ): 13.06% allocation.
• Pacer Data and Digital Revolution ETF ( TRFK ): 12.31% allocation.

In other related news, Nvidia is set to join the $1T market cap club.

More on Nvidia:

• Nvidia introduces DGX GH200 AI supercomputer
• Nvidia Q1: AI Hype Vs. Insider Selling
• Nvidia Bulls Are Way Overestimating AI GPU Demand
• Nvidia's CUDA: Unleashing The Power Of Parallel Computing For AI Dominance

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