NVIDIA Enters Correction: Worry or Opportunity?

Key Points

• NVIDIA recently experienced an 11% pullback from its 52-week high and is entering a correction phase.
• The pullback towards its rising 50-day SMA suggests a controlled adjustment rather than a significant downturn.
• Despite the recent correction, analysts and institutions maintain confidence in NVIDIA's prospects and have raised the stock's price targets.

NVIDIA Corp. NASDAQ: NVDA has consistently showcased its prowess as a leader in innovation and growth, particularly in the semiconductor sector and the development of artificial intelligence (AI).

After an impressive start to the year, marked by a substantial 75% YTD surge, NVIDIA has recently experienced a pullback of nearly 11% from its 52-week high. This correction places NVIDIA in a precarious position, raising questions about its short-term prospects.

Investors now face a crucial decision: is this pullback a signal of further decline, warranting caution? Or does it present a compelling opportunity to acquire shares of a company renowned for its resilience, growth and sector dominance?

NVIDIA Stock Enters Correction

As shares of the semiconductor and AI giant have pulled back, it has theoretically entered a correction. However, from a technical analysis perspective, the stock is taking a breather, pulling back sustainably toward its rising 50-day Simple Moving Average (SMA) — a good way to digest the recent surge.

On a higher timeframe, NVIDIA's shares are currently in a steady uptrend, with the rising 50-day SMA acting as a potential buying opportunity as the market leader experiences a controlled pullback.

Fundamentally, NVIDIA Continues to Impress

While the stock has pulled back in recent weeks, along with the overall market and its sector, NVIDIA continues to outperform and impress fundamentally. 

The company unveiled its latest earnings report on February 21. The renowned computer hardware manufacturer surpassed expectations, posting an EPS of $5.16 for the quarter, surpassing the consensus estimate of $4.21 by a significant margin of 95 cents. NVDA's quarterly revenue stood at $22.10 billion, outperforming analyst projections of $20.40 billion and marking a remarkable 265.3% increase YOY.

Over the past year, NVIDIA has delivered a remarkable performance, with EPS totaling $11.94. The company boasts a price-to-earnings ratio (P/E) of 72.55 and forward P/E of 28. Looking ahead, analysts anticipate a robust 12.92% growth in earnings for NVIDIA in the upcoming year, projecting an increase from $22.45 to $25.35 per share.

Despite the recent correction, analysts continue to pound the table on NVIDIA. The stock remains one of the top-rated, most-upgraded, and searched-for stocks. Based on 41 analyst ratings, NVIDIA has a Moderate Buy rating and a price target that predicts close to 6% upside. 

However, several analysts recently became bullish on the name and taken action by reiterating their rating and boosting their target. On April 4, Susquehanna reiterated its rating on NVDA, along with its price target of $1,050, which saw over 17% upside. Four days later, analysts from KeyCorp boosted their target from $1,100 to $1,200, predicting a whopping 35.44% increase for the stock. Most recently, on April 10, Morgan Stanley boosted its target from $795 to $1,000, a notable increase that saw almost 16% upside for the stock.

In addition, institutions continue to purchase and hold shares of NVIDIA. Over the previous 12 months, institutional inflows amounted to $660 billion, compared to just $47 billion in institutional outflows. Currently, institutional ownership in the stock is an impressive 65.27%

The Bottom Line

As the market grapples with these considerations for the short term, NVIDIA's future trajectory is undoubtedly bright, as the company remains at the forefront of the AI growth wave. One thing is certain: NVIDIA's track record of innovation and growth continues to attract investors' attention, shaping its narrative in the ever-changing stock market landscape.