It turns out the bears were right about NVIDIA Corporation (NASDAQ:NVDA) shares… for about a day. Then, NVDA stock proved them wrong again.
Although the market didn’t love the cyprotcurrency-driven second-quarter earnings beat, they didn’t hate it either. There was no bubble popping. No sharp reversal in momentum or sentiment. No disastrous end to what has been a monstrous run higher in NVDA stock.
Just a dip that was bought by anyone who understands that the NVDA growth story is still in its early chapters.
Since that post-earnings bounce-back, NVDA stock has simply traded sideways, in much the same way it did before the earnings report. In fact, since mid-July, NVDA has moved largely sideways.
My read on it, though, it that this hyper-growth stock is consolidating before making its next move higher.
Buzz on NVDA Remains Positive
The recent buzz around NVDA stock has been more of the same bullishness that has fueled this stock for the past two years.
Jefferies Group LLC (NYSE:JEF) sounded a bullish tone on NVDA stock recently after analyst Mark Lipacis and team sat down with NVIDIA management. Lipacis left the conversation with the same sentiment that has had investors buying up the shares for awhile now. The current hyperscale data center growth is still in its early innings. There are several chapters left in that growth story. Meanwhile, the autonomous-driving growth story is just starting to come into its own.
Coming at it from a different angle, Goldman Sachs Group Inc (NYSE:GS) thinks that higher interest rates next year will make growth stocks more attractive. That makes sense. Higher interest rates will curtail growth, so robust earnings improvement will be harder to find. The companies that remain growth stocks will consequently be awarded a nice premium.
One of the stocks at the top of Goldman’s list? NVDA.
And perhaps the most interesting recent analyst note comes from boutique firm Global Equities Research, where analyst Trip Chowdhry notes that Wal-Mart Stores Inc (NYSE:WMT) is making a big cloud push. He says that NVDA will be a natural winner in that transition.
According to Chowdhry, Walmart is “going full steam with DNN (deep neural networks) and will be creating its own NVDA GPU Clusters on Walmart Cloud”. Chowdhry expects this catalyst to be big, as Walmart’s GPU farm will be about one-tenth the size of Amazon’s GPU Cloud, and to happen within the next six months.
All in all, most of the buzz on this name remains largely bullish. Some investors want to buy this stock because it has huge potential in automated driving or because it’s a high-growth name in what will soon be a lower-growth environment.
Other investors want to buy NVDA because it plays a critical role in the hyperscale data-center growth story or because its exposed to all things artificial intelligence.
Or maybe some mix of all these.
Whatever the reason, you want to buy NVDA stock. The story is just too good to pass on, and the valuation is still reasonable.
Bottom Line on NVDA Stock
I’ve been bullish for a while on NVDA. I actually think the recent range-bound stock behavior against a strong fundamental backdrop is a buying opportunity.
Just look at the year-to-date chart for NVDA stock. This range-bound behavior is exactly what the stock exhibited from January 2017 to May 2017. The stock bounced and fell, but ultimately traveled from $102 to $103.
Source: Google Finance
And then NVDA delivered a blowout quarter in May, and the stock jumped. Over the next several months, it soared from $103 to $170.
Considering the NVDA growth story looks stronger now than ever before, I think its likely NVDA stock is prepping for a similar upward surge sometime in the near future.
So don’t be surprised to see this stock touch $180 or higher sometime soon.
As of this writing, Luke Lango was long NVDA.
