Nvidia Continues to Soar: How High Can It Go?
Our Sister Publication World Opportunity Investor Recommended 200 shares of NVIDIA Corporation (NasdaqGS: NVDA) at $599.67 on 5/21/2021 in Alert #139. Since then, the high-technology company has been jumping in price, reaching $721.16 a share this afternoon or a whopping 20% rise in 23 days.
Our sister publication World Opportunity Investor recommended buying 200 shares of NVIDIA CORP (NVDA) on May 21, 2021, just 23 days ago, and the company’s shares have jumped 20%. The rise in the company’s shares can be attributed to several important catalysts in multiple areas, such as its robust revenue growth, largely solid financial position, reasonable debt levels plus an impressive record of earnings per share growth, compelling growth in net income, and expanding profit margins.
The company’s continued strength has been so strong that the company is trading at a premium valuation. The valuation is driven by impressive revenue growth that has dramatically greatly exceeded its sector growth by an average of 39.4%. In the last quarter, revenues jumped 83.8%. They helped the company’s revenue boost its earnings per share and lifted the firm’s current debt-to-equity ratio to a low of 0.41, which is well below the subsector average, proving that management has successfully managed the company debt levels.
Bedsides superior earnings and debt ratio on NVIDIA Corporation has maintained a quick ratio of 3.92, which shows it can clearly cover all of its short-term cash needs. Moreover, its earnings per share improvement in the most recent quarter compared to the same quarter a year ago shows a dramatic growth improvement over the past two years.
Other analysts and we believe NVIDA will show an improvement in earnings to $15.86 a share versus $6.89 and that the net income growth from the last quarter year over year has and will continue to significantly exceed that of the S&P 500 and its competitors in the Computer and Electronic Product Manufacturing sector.
In short, NVIDA’s net income increased by 108.5% compared to the same quarter one year prior, rising from $917.00 million to $1,912.00 million. In addition, the company’s gross profit margin continues to show a relatively high level, currently at 69.07%.
It has increased from the same quarter the previous year; along with this, the net profit margin of 33.77% is above that of the subsector average. Keep in mind that this tremendous success has continued despite the worst shortages in semiconductors that have ever occurred, thanks to the steep drop-off during the worst of the Covid-19 in Asia. Despite this production curtailment, demand for computer ships has remained elevated. This has been especially true about the crypto-mining market keeping demand high for mining-specific chips that NVIDA specializes.
Another good indicator for chip demand has come from other chip reliant company’s like Apple (AAPL) and Amazon (AMZN), who have to experience the same high demand for chips as the result of continued solid operations and have also experienced better-than-expected results, yet unlike NVIDA, have experienced stagnant share price.
Our Erlanger Charts indicate that the 20% run-up in NVIDA’s share price may be t3eh beginning of a bigger run-up…
NVIDA’s breakout over $650 and 100% tech rank and a 4-for-1 stock split coming on July 20, 2021, could lock in a total move that could drive the stock to $1,000 a share (net $250 after the stock split). For this reason, we are holding the 200 share position recommend in WorldOpportunityInvestor.com we recommended on May 21, 2021.
We, therefore, remain bullish on Nvidia. A break over $800 a share in the next 30 days and split at a point where the company’s shares have climbed over $800 a share will go a long way to driving the company’s share over $1,000 each by late summer 2021, just as the worst of the Covid-19 pandemic has passed over most of the world,
A post-split valuation of $220 or a pre-split of $860 may seem impossible for long-term investors or traders. Still, we offer the warning that the earnings momentum and demand for Nvidia chips, software, and products could experience a huge jump in demand in a post-pandemic world, and anyone betting short could be crushed as we enter the end of 2021.
Any re-test of the $650 that takes place as a macro-market pull back should be bought with that in mind. Adding NVIDA shares on such a pullback may still be awarded a rally to $800, even $1,000 pre-split, $200 even $250 run-up in the company’s shares.