Key Reasons Why the Bull Case for Nvidia Stock Remains in Motion

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As investors jump back into hard-hit stocks, tech names like Nvidia (NASDAQ:NVDA) have cooled down a bit. But that doesn’t mean it’s time to sell NVDA stock. Granted, shares may take a breather, after the stock’s recent epic rebound. Yet, the company’s long-term catalysts remain in motion.

Key Reasons Why the Bull Case for NVDA Stock Remains in Motion

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The endurance of these catalysts has been strengthened by continued gaming and data center success. And the company also retains its exposure to key megatrends. As such, Nvidia is a solid bet on future technologies like artificial intelligence and emerging technologies like autonomous vehicles and machine learning. In short, there are many pathways for long-term growth.

With this in mind, today’s premium valuation shouldn’t be a major concern. Wall Street knows this company is a winner, and has priced shares accordingly. Novel coronavirus tailwinds may have accelerated things a bit. But the underlying secular growth trends aren’t going anywhere. It makes perfect sense investors keep bidding NVDA stock higher.

So, are shares a buy today? Yes. Even as they hold steady around $350 per share. As the company remains on the winning side of multiple megatrends, the bull case remains in motion.

Tailwinds and Megatrends Bode Well for NVDA Stock

It’s safe the say the “stay-at-home” economy has been a tailwind, not a headwind, for this company. With spiking video game and cloud computing demand, the chip giant has seen growth at a time where most businesses are just happy to have some stability. And this was on full display in the most recent earnings report. With sales for the quarter ending April 26 rising 39% year-over-year, the company more than beat analyst consensus.

But, with the coronavirus quickly entering the rear view mirror, what’s next? Can Nvidia continue to dominate, beating Wall Street’s estimates through 2020? I don’t see why not. Accelerated gaming and data center sales from the outbreak are not a one-time event. In other words, growth in these markets isn’t going away anytime soon.

Advanced Micro Devices (NASDAQ:AMD) may be giving the company a run for its money in GPUs as of late. But, with the GPU market set to grow 94% from 2019 through 2025, there’s more than enough room for both companies to see significant growth. In short, both companies will continue “crushing it.” If anyone’s getting “left in the dust,” it’s probably Intel (NASDAQ:INTC).

Add in the benefits from the recent Mellanox deal, and it’s crystal clear the near-term prospects for NVDA stock remain strong. But, today’s tailwinds are just the start. As I hinted at above, emerging technologies provide the company with significant runway.

The company’s move into new technologies is already bearing fruit. Namely, their partnerships with automakers to develop AVs, or autonomous vehicles. Names like Tesla (NASDAQ:TSLA) may have more exposure to this megatrend. But, as the auto industry pivots towards self-driving cars, Nvidia has the opportunity to build a substantial business in this space.

Don’t Let Valuation Scare You Off This Long-Term Winner

The flip side to Nvidia’s stock is its valuation. Wall Street knows this company will continue to thrive. And they’ve priced shares accordingly. Today, the stock trades at a forward price-to-earnings (P/E) ratio of 43.2.

AMD may trade at a higher multiple (51.2), but that doesn’t make Nvidia a cheap stock by any means. Other strong growth stories, like Google parent Alphabet (NASDAQ:GOOG NASDAQ:GOOGL) trade at lower multiples (forward P/E of 33.8).

Yet, don’t let a rich valuation make you miss out on this long-term winner. In today’s market, you have to pay up for growth. With stocks like Nvidia, you aren’t buying it for the dividend. You’re buying it for the company’s scaling-up potential.

With projected growth in the double-digits this fiscal year (ending January) alone, this appears to be in the cards. Massive gaming and data center demand means this trend continues. As AI and AV technology gains critical mass, this above-average growth could remain throughout the decade.

Getting fixated on today’s valuation will only leave you with regrets down the road. That’s not to say this is a buy at any price. But, even after shares have rebounded from March’s stock market maelstrom, there’s plenty left on the table with this stock.

Nvidia Is Worth a Look Even Near All-Time Highs

When the pandemic first hit, investors feared a derailed growth train for Nvidia. But, as the stay-at-home economy proved to be a tailwind, shares bounced back with a vengeance. Shares now trade substantially higher than where they were before the outbreak.

Shares may now trade near all-time highs. But that doesn’t mean they’re going to tumble from here. Short-term tailwinds remain in motion. Long-term megatrends are starting to bear fruit. In short, long-term winner NVDA remains a solid buy in today’s market.

Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.


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