Is Nvidia Stock Overbought, Overpriced?

At the forefront of the market surge is Nvidia NASDAQ:NVDA, continuing its meteoric rise into the new year. Last year’s champion wasted no time in extending his winning streak, mirroring his outstanding performance the year before.

In 2023, Nvidia grew an astonishing 239%, leaving its tech competitors far behind. The catalyst for this extraordinary growth was the unprecedented demand for its products, which drove the company to deliver exceptional profits quarter after quarter.

Now, as we move into 2024, Nvidia shows no signs of slowing down, already boasting an impressive 60% year-to-date growth and a staggering 238% leap from the previous year, cementing its position as the third largest company by market. capitalization, behind only Microsoft and Apple, with a valuation exceeding $1.97 trillion.

Nvidia continues its dominance

Over the past year, Nvidia’s trajectory has been a testament to its dominance in the semiconductor industry, fueled by the relentless expansion of artificial intelligence (AI) applications.

The company’s rapid rise over the past year has seen it become the SPDR S&P 500 ETF NYSE: SPY fourth top holding, with an impressive weight of 3.01%. More indicative of its dominance in the sector is its huge weight in the VanEck Semiconductor ETF NASDAQ: SMHwhich currently stands at 19.77%.

Each milestone quarter has reaffirmed Nvidia’s prowess, with its latest earnings report on February 21, 2024, showing yet another notable performance. The computer hardware giant reported earnings per share of $5.16 for the quarter, topping analysts’ estimates by a notable margin of $0.95, and generating revenue of $22.10 billion, far exceeding long analysts’ expectations of $20.40 billion. This incredible achievement represents a 265.3% year-over-year increase in quarterly revenue, underscoring Nvidia’s unprecedented growth trajectory.

Looking ahead, Nvidia remains poised for further expansion, with earnings expected to grow 9.23% next year to an estimate of $23.78 per share. The company’s relentless innovation and strategic positioning continue to earn widespread trust among investors and analysts alike.

Analysts remain bullish and expect a rise

Analysts remain steadfast in their bullish outlook for Nvidia, recognizing its unrivaled market position and growth potential. With as many as forty analyst ratings giving a Moderate Buy rating, Nvidia is one of the most closely watched and researched stocks on the market.

Notably, the consensus price target suggests upside of more than 8% for the stock, despite its already substantial appreciation year-to-date and over the past year.

Of the forty analysts’ ratings, one has the stock as “strong buy”, thirty-six as “buy” and three as “hold”. No analysts rated the company as for sale for the first time in over a year.

Is it too late to buy?

The persistent scarcity of Nvidia products and its clear technological superiority over competitors provide a bullish outlook for the stock. Despite its current inflated P/E ratio of 66 and a forward P/E of 26.75, which signal a more modest valuation, Nvidia stock appears to be reasonably priced, especially considering its compelling market position and recent earnings extraordinary. Considering these factors, AI stock promises further upward momentum throughout 2024.

From a more technical perspective, the stock currently has an RSI of 71.61, signaling that it may have entered overbought territory in the short term. With the price significantly extended from the major moving averages, a break below the rising 5-day SMA could signal a pullback. Given the positive momentum behind the company and the stock, a pullback could be a great entry into a long-term trade or investment and will likely be met with buying.

Before you consider NVIDIA, you’ll want to hear this.

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