Thank Nervous Investors for This Prime Opportunity to Buy NVDA Stock
A prominent Wall Street expert is concerned about weakness in the PC market. His point is duly noted, but NVDA stock can still recover.
Nvidia (NASDAQ:NVDA) stock is just one of many downtrodden tech stocks of 2022. As some investors fret over PC-market pressure, it might be tempting to give up on Nvidia altogether. However, the shares are so beaten-down that it’s starting to look like an overreaction. Besides, Nvidia’s latest GPU lineup is bound to be a game-changer, literally and otherwise.
If people hoped that Nvidia would single-handedly save the tech sector in August, they were surely disappointed. The company reported second-quarter fiscal 2023 GAAP earnings per diluted share of just 26 cents, down 72% year-over-year (YOY). Moreover, gaming-segment revenue declined 33% YOY, and that’s the company’s bread and butter.
Nvidia’s quarterly results stoked the market’s bearish sentiment, and a Wall Street expert’s PC-industry concerns only add to the anxiety. Nevertheless, contrarian investors should see the pessimism as overstated — and with top-tier gaming tech, Nvidia might manage to prove the skeptics wrong.
NVDA Stock Gets a Price Target Cut
When stocks decline precipitously, it’s normal for analysts to reduce their price targets. That said, it’s instructive to consider their stated reasons for lowering their share-price forecasts.
Thus, as Susquehanna analyst Christopher Rolland just cut his price target on NVDA stock from $190 to $180, investors should want to know why. Apparently, his primary reason is simple: The PC market isn’t doing well.
Rolland’s “checks indicate PC-market weakness may be extending beyond consumer and into enterprise.” Consequently, Susquehanna reduced the firm’s share-price prediction for Nvidia and its peers to reflect a “new PC-shipment forecast and weakening PC-industry checks.”
That’s a fair point, as Rolland expects PC-industry shipments to fall 17% this year, which is worse than his previous prediction of an 11% decline. Naturally, this should dent Nvidia’s top and bottom lines to a certain extent.
The Market’s Pessimism Could Be a Setup for a Great Quarter
While Rolland’s point about PC-industry pressure is duly noted, it’s also most likely priced into NVDA stock by now. After all, PC-market weakness isn’t a secret, and the markets are quite efficient.
Indeed, investors are so pessimistic and the bar is so low that Nvidia should be able to surpass analysts’ expectations in the fourth quarter. To this point, Nvidia CEO Jensen Huang expects “a pretty terrific Q4 for Ada,” referring to the company’s recently unveiled next-generation chip architecture.
Let’s not forget that Nvidia’s shareholder value comes from its tech innovations. “Ada” refers to Ada Lovelace, which will power Nvidia’s much-talked-about RTX 4090 graphics card. Ada’s specs should make any tech geek salivate:
“Ada’s advancements include a new Streaming Multiprocessor, a new RT Core with twice the ray-triangle intersection throughput, and a new Tensor Core with the Hopper FP8 Transformer Engine and 1.4 petaflops of Tensor processor power.”
It’s fine if you’re not up to speed on “ray-triangle intersection throughput” and “petaflops.” Suffice it to say that Ada Lovelace and the RTX 4090 should keep competing GPU makers at bay and hardcore gamers happy.
There’s Strong Value in NVDA Stock
NVDA stock is cheaper than it’s been in a while, and Nvidia’s market capitalization is down to around $300 billion. In other words, you’re looking at a great value-investing opportunity.
For this, we can thank the market, as it seems that investors have overreacted to an admittedly weak PC market. Meanwhile, Nvidia is still doing what it does best: building the components that gamers crave and developers demand.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.