Nvidia (NASDAQ:NVDA) has not been able to escape the coronavirus-induced carnage we’ve seen in the stock market. As a result, NVDA stock has fallen more than 33% from peak to trough.
However, that spells opportunity for investors who can tune out the noise — there’s a lot of it right now — and make rational decisions at a difficult time.
The hard part is, we don’t know if the S&P 500 will fall 32% from its highs, like it has already, or if it will fall substantially more.
NVDA Stock’s Coronavirus Selloff
Because there are so many unknowns in our current situation, related to both the market and Covid-19, the market is throwing a tantrum. The panic is palpable, as Jeffrey Gundlach recently said.
In the case of Nvidia, though, panic equates to opportunity. While we know that the global economy is experiencing an abrupt disruption, we also know that long-term growth themes will stay in place. For Nvidia, that’s a very good thing, because it has plenty of runway.
When bear markets come around, they do one of several things. First, poorly run companies with weak balance sheets and susceptible business models get hung out to dry. However, it also deals a swift blow to high-quality companies; the so-called babies thrown out with the bath water. Nvidia appears to be one of those companies.
Long-Term Growth for Nvidia
If you’ve ever had the opportunity to visit one of Nvidia’s GTC conferences, you’ll see what amazing technology this company boasts. Innovation remains in its pulse and new capabilities continue to drive its growth.
Nvidia is leading the autonomous driving revolution, as it powers artificial intelligence (AI) and machine learning (ML) technologies. Even though the company is building an entire industry-leading ecosystem around logistics, the potential of AI and ML are not bound to the highway. They can be used in agriculture, energy, health care, analytics and countless other industries to drive efficiencies.
Beyond AI and ML, Nvidia’s GPUs continue to push the limit in terms of computing power — and it’s not just for gamers. Many of the world’s most powerful supercomputers are powered by Nvidia. Then there’s the cloud, graphics and data center businesses to consider.
Nvidia was dealt a setback with its crypto-related hangover in late 2018, which persisted for about a year. But with that now in the past, this company has some serious long-term growth potential. The same can be said of Advanced Micro Devices (NASDAQ:AMD).
Just last month, Nvidia reported strong earnings, beating on top- and bottom-line expectations. Even accounting for a $100 million revenue hit from COVID-19, Nvidia’s guidance still beat consensus expectations. The report sent shares ripping higher, topping at $316.32. If it weren’t for the coronavirus, this stock would likely still be north of $300.
Now trading at roughly 25 times this year’s earnings outlook, Nvidia seems reasonably priced. Given that it’s powering tomorrow’s technology today though, Nvidia feels like an outright bargain below $200 for long-term investors.
Buy the Dip in NVDA Stock
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From its high last month to its low on March 18, Nvidia’s stock price has fallen 42.8%. That’s a stunning collapse in less than a month with little fundamental relevance.
Surely the company will feel a business impact from Covid-19, but not one that justifies such a drop. The crazy thing is though, there’s nothing stopping Nvidia from falling 50%. Or 60%.
Investors have to realize, they do not pick the cards they are dealt, they can only play their hand.
No one is forcing them to buy Nvidia at today’s price — no one’s forcing them to do anything! But opportunities like this do not come around very often, and I would bet that 24 months from now, Nvidia shares will be higher (and with any luck, it won’t take anywhere close to that much time).
A glance at the weekly chart above shows just how destructive this latest fall has been. After breaking below the $200 mark several times this week, shares have cratered more than $100.
Near $200, there are several support areas to consider. The 50-week and 100-week moving averages sit between $197 and $203, while $190 was notable resistance in 2019 and should act as support on the way down. In this type of market though, support levels are taken with a grain of salt, as broad-market selling pressure can overwhelm even the best of stocks.
Below $190 and investors need to be open-minded about a test of $170, and potentially lower. For something like Nvidia, though, the lower prices are welcomed, as long-term investors will reap big rewards.
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.
