Down around 25% year-to-date, 2022 has been a frustrating year for Nvidia (NASDAQ:NVDA) investors. Many factors have put pressure on the price of NVDA stock.
I’m sure you’re aware of the external factors bearing down on Nvidia. Inflation, interest rates and now the Russia-Ukraine war have caused tech stocks to tank.
The Russia situation has technically caused tech stocks to enter bear market territory. If that’s not bad enough, the chip giant has had to deal with a few hiccups as well. This has happened all while the broader tech selloff has been going on.
As you likely recall, the company had to scrap its deal to buy Arm due to regulatory issues. It also had to deal with a cyberattack. Although this hacking incident is small potatoes in the grand scheme of things, it certainly didn’t do it any favors, as bullishness for shares continues to drop off.
However, while things haven’t been going Nvidia’s way, there’s no need to bail. In fact, after its recent weakness, now may be the right time to enter/add to a position. Long-term tailwinds will more than make up for the many headwinds that have knocked it lower in recent months.
What’s On The Horizon for NVDA Stock?
Recent company-specific issues (scrapping Arm deal, cyberattack) may now be fully absorbed by the market. Yet the external factors that have affected its performance could continue to do so.
In the short-term, the direction tech stocks move from here will largely dictate the next direction for NVDA stock. If investors realize that they have overreacted to the aforementioned uncertainties? We could see shares, alongside shares in other major Nasdaq 100 components, continue to bounce back, as they’ve been doing in recent days.
Conversely, if more bad news, whether on geopolitics, inflation or interest rates, comes about, then further weakness may lie ahead. However, focusing on the near term isn’t the best approach with Nvidia stock. The beauty of it is with its potential to steadily compound over time. Not attempting to profit from trading around it.
That is, while the near-term is tough to handicap, there’s still a fairly clear picture of where this company is going from here. Leveling up after its strong operating performance throughout the pandemic, the years ahead stand to bring more of the solid revenue and earnings growth we’ve seen over the two preceding fiscal years.
Keep Your Focus on the Long Term
Market conditions may have changed, and could continue to change. But the trends that fueled the incredible run of NVDA stock in 2020 and 2021 aren’t going away. Demand for its GPUs among end users in cloud computing, video gaming and other sectors remains robust.
New markets are enabling parts of the company to report exceptionally high rates of growth. Last quarter, when it reported 53% overall revenue growth year-over-year, its data center unit reported revenue growth of 71%. This was driven by increased use of graphics processors in order to run artificial intelligence (AI) applications. Another emerging segment, Professional Visualization, reported annual sales growth of 109%.
Other promising growth areas, like automotive, may be on hold for now, due to the supply shocks. Yet once these supply shocks resolve, this is another area that could help enable Nvidia to keep expanding at an above-average pace. This fiscal year (ending January 2023), the sell-side estimates the company’s top line will grow 29%.
Earnings-per-share (EPS) of around $5.61 per share are projected to come in around 26.4% above 2021’s EPS number ($4.44). As this plays out, and the company continues to thrive, despite fears that the pandemic “pulled forward” many years worth of growth, the stock will gradually make a recovery. That’s especially true given that it’s at around $225 per share today (down from as much as $346.47 last year). NVDA stock has plenty of room to chart a comeback.
The Verdict on NVDA Stock
Cashing out of Nvidia today may result in you leaving money on the table. Nvidia has an “A” rating in my Portfolio Grader. Its decline over the past four months is more the product of short-term volatility, rather than a sign that it’s the beginning of the end for this stock’s incredible multi-year run.
For those still sitting on the sidelines? The knockdown to Nvidia’s stock price gives you the opportunity to enter a position at a favorable price. Its troubles will pass, but the factors that have, and will continue to, enable it to report above-average rates of growth for years to come are here to stay.
Furthermore, as I recently commented when breaking down the case for Nvidia:
“NVDA has 43.4% annual forecasted revenue growth and 41.8% annual earnings growth. The analyst community has revised their consensus earnings estimate up 10.3% higher for NVDA in the past month. The war & hacking will not disrupt NVDA, which dominate graphics chips and AI chips. Nvidia is a monopoly and a very safe investment.”
With the negatives overly reflected in the price of NVDA stock, and the positives not reflected enough, it’s a buy.
On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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