After coming under intense selling pressure last week, chipmaker NVIDIA (NASDAQ:) is slipping into a bear market.
The sell-off, which pushed semiconductor sector stocks down more than 18% from their November peak, comes after a stunning rally over the past year. However, that abrupt pullback has left many investors wondering whether now is the right time to buy the shares of the largest US chipmaker by market capitalization. NVDA shares closed at $272.47 Friday, down more than 7% during the first trading week of 2022 as investors shun high-growth technology stocks for fear that with higher interest rates it will be difficult to keep up with the pulse-pounding valuations of these former market treasures. justify. Stocks are most vulnerable when prices begin to rise because their value relies heavily on future earnings, which analysts discount in current dollars using prevailing market rates. The higher those rates, the smaller the present value of those earnings. According to data collected by Bernstein, about a third of all technology stocks were recently traded at more than 10 times their earnings. By comparison, it was valued at 3.2 times sales, according to data from Bloomberg. While the macro outlook is clearly becoming hostile to NVIDIA and other technology names, this slump may finally offer investors a chance to take a position in a fantastic company experiencing explosive growth.
In its most recent , released in mid-November, the Santa Clara, California-based chipmaker produced record sales and delivered another bullish forecast for the company's fiscal fourth quarter. That guidance far exceeded the average estimates of analysts. That performance has helped make it one of the top 10 companies by market value on the S&P 500. And that has made NVDA one of the most beloved chip stocks. five years and has beaten Street's revenue estimates for 10 consecutive quarters.
In a poll of 42 analysts conducted by Investing.com, 36 gave the stock an "outperform" rating with a 12-month consensus target of $340.59, showing an upside potential of 25% from the current market price. 2022, including a strong gaming season for the holiday season, solid data center demand trends and improvements in game/network supply in the second half of this year. NVIDIA is a supplier of the key components needed for all major, fast-growing technologies, including cloud computing, artificial intelligence, robotics automation, mobile computing, the Internet of Things and crypto mining. Gaming and data centers have been NVIDIA's main breadwinners, but the company is also well positioned to take advantage of other secular trends. like Facebook, in October announced its new push to develop the metaverse, a digital environment accessible with virtual reality tools that rely on powerful processors. Meta and other tech giants are investing billions in this initiative and NVIDIA is expected to be a major beneficiary and contributor to this new phase. after dropping nearly 20% over the past five weeks, they have become attractive to investors sitting on the sidelines waiting for a better entry point. That weakness, in our view, has more room to run, however, as large institutional investors continue to realign their portfolios and move their cash into safe-haven assets. We therefore believe that long-term investors will. get a much better price for NVDA stock in the coming weeks.