Trading Signals - Nvidia Corporation (NVDA)
Aries Yuangga, Wakil Penasihat Berjangka
Nvidia's Q4 Earnings: A Catalyst for Continued Growth Amid AI Revolution
Summary
Nvidia Corporation (NASDAQ: NVDA) has been a standout performer in the tech sector, particularly since my last coverage in May 2023. Despite a neutral stance back then, Nvidia has since made a significant alpha run, particularly from January 2024, outperforming the S&P 500 by +62.06%. This surge underscores the company's robust fundamentals and its pivotal role in the burgeoning AI revolution. As Nvidia gears up for its Q4 earnings announcement on February 21, 2024, the anticipation is high, and the potential for a post-earnings correction could present a lucrative buying opportunity for investors.
Based on the provided chart for NVIDIA Corporation (NVDA):
Technical Analysis
Strong Bullish Trend: NVDA shows a strong bullish trend with a sequence of higher highs and higher lows. The stock has maintained above the upward-sloping trendline, reinforcing the bullish sentiment.
Fibonacci Retracement: The Fibonacci retracement levels indicate potential areas where the stock might find support on pullbacks. Notably, the 0.236 level at $520.43 and the 0.382 level at $563.46 could be key zones for potential reversals.
Support and Resistance: The immediate support is near the 0.236 Fibonacci level at $520.43. Resistance is likely near the all-time high, with the stock aiming for new highs. The psychological level of $800 could act as resistance before the stock reaches the 1.618 Fibonacci extension level at $927.82.
Trading Setup
Buy Range: Between $520 and $600, coinciding with the area between the 0.236 and 0.5 Fibonacci retracement levels.
Stop Loss (SL): Set at $445, below the trendline and recent swing lows, to protect against a larger downward move.
Profit Targets: Looking to take profits at $745 (just above the 1 Fibonacci level), $800 (psychological level), and $927 (1.618 Fibonacci extension level).
Potential Gains and Losses
Potential Loss: If entering at the midpoint of the buy range ($560) and stopping out at $445, the potential loss would be $115 per share, representing a loss of approximately 20.54%.
Potential Gains: From a $560 entry, potential gains to each target would be:
To $745 (first target): a gain of $185 per share, or approximately 33.04%.
To $800 (second target): a gain of $240 per share, or approximately 42.86%.
To $927 (third target): a gain of $367 per share, or approximately 65.54%.
These potential gains and losses are hypothetical and based on the technical setup provided. Traders should continuously assess market conditions and adjust their strategies accordingly. It's also important to manage risk and not invest more than one can afford to lose.
Backlog Growth and Revenue Potential
As indicated by its Remaining Performance Obligations (RPO), Nvidia's backlog growth reveals a strong unrealized revenue growth potential. The acceleration in YoY RPO growth, particularly beyond the next twelve months (NTM), suggests that Nvidia's customers are committing to longer-term contracts. This provides revenue stability and visibility well into 2025 and beyond. CEO Jensen Huang's confidence in data center growth through 2025, driven by enterprise AI adoption, further bolsters this outlook.
Gross Margin Expansion and Favorable Mix Shift
The shift towards the Compute & Networking segment, which includes high-performance computing chips, is expected to continue driving gross margin expansion. This segment, growing at an explosive rate, contributes to a favorable mix shift in Nvidia's revenue profile. With Compute & Networking achieving 70% EBIT margins compared to the Graphics segment's 40%, the ongoing mix shift is poised to further enhance overall margins.
Valuations and Market Capitalization
Despite reaching record-high market capitalization levels at $1.8 trillion, Nvidia's valuations, near 5-year troughs at 36.8x forward P/E, present an attractive entry point. The company's consistent ability to exceed market expectations and its strong growth outlook suggest that the current valuation may undervalue its future earnings potential.
Investment Strategy
While technical analysis indicates a bullish outlook for Nvidia, caution is advised due to the potential for a post-earnings correction. Historical patterns suggest that Nvidia's stock may experience a sell-off upon earnings release, especially following a pre-earnings rally. Investors should consider this potential volatility when planning their investment strategy, looking to buy on weakness if the opportunity arises.
The AI Revolution and Nvidia's Competitive Edge
Nvidia stands at the forefront of the AI revolution, with its unparalleled computing power and chips essential for AI models. The company's competitive advantages, including a significant R&D lead and a fabless model, position it uniquely to capitalize on the growing demand for AI applications. Partnerships and investments in AI startups further solidify Nvidia's ecosystem, enhancing its long-term growth prospects.
Conclusion: A Bullish Outlook with a Note of Caution
As Nvidia prepares to announce its Q4 earnings, its strong fundamentals, backlog growth, and strategic positioning in the AI sector underscore a bullish outlook. However, investors should remain mindful of the potential for post-earnings volatility and consider using any correction as a buying opportunity. With Nvidia's continued innovation and market leadership, the company is well-positioned to sustain its growth trajectory and deliver value to shareholders over the long term.
*Disclaimer:
This analysis is based on historical price movements and technical indicators. Investors are advised to conduct their own research and consult with financial advisors. The stock market is inherently volatile, and past performance does not guarantee future results. This information is provided for general information purposes only. Consider your investment objectives, financial resources and other relevant circumstances carefully before investing. This is not an invitation or an offer to invest, nor is it financial advice or a recommendation to buy or sell any investment.
