Shares of NVIDIA Corp have risen by over 32% so far in 2018, but over the past six months the stock has stalled out, rising just 5%. Shares may start climbing again, based on technical analysis, resulting in a rise of about 10%. The options set to expire in September also project a bullish outlook for the stock in the coming weeks.
Shares of the chipmaker are due to report fiscal second-quarter 2019 results in the middle of August. Analysts are looking for significant earnings and revenue growth out of the company. Earnings are forecast to rise by over 82%, while revenue is forecast to climb by over 39%.
Shares of the chipmaker are due to report fiscal second-quarter 2019 results in the middle of August. Analysts are looking for significant earnings and revenue growth out of the company. Earnings are forecast to rise by over 82%, while revenue is forecast to climb by over 39%
A Breakout Nears
The technical chart for NVIDIA shows the stock approaching a technical resistance level near $260.50. Should the stock price rise above that level of technical resistance, it may result in a breakout sending the stock to nearly $280, a jump of about 10% from the stock’s current price around $253. The relative strength index is also trending higher after a couple of months of consolidation, suggesting that bullish momentum is coming back into the stock. Volume has also started slowly trending higher over the past several days, indicating that buyers may be moving back into the stock.
Bullish Options
The options for expiration on Sept. 21 also indicate that the stock may be on the rise. At the $260 strike price, the number of bets that shares will rise outnumber the wagers the stock will fall, by a ratio of about 3 to 1, with 5,400 open call contracts. It is not a small bet at that strike price either, with a dollar value of about $6.4 million.
Analysts are looking for the company to post strong fiscal second-quarter results in a few weeks’ time. Additionally, the outlook for the full-year 2019 looks strong as well, with forecasts calling for earnings growth of over 58% and revenue growth of over 34%.
The average analyst's price target also suggests the stock continues to rise, with an average price target of about $275, about 8% higher than the stock's current price.
After six months of trading sideways, NVIDIA shares may be gearing up to start advancing once again. But should the stock be unable to achieve a technical breakout, investors will likely have to endure a period of further consolidation, hoping for better-than-expected quarterly results later in August to spark the stock's further rise.
Michael Kramer is the founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.
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