Sentiment Remains Soft On Nvidia

With NVIDIA Corporation NVDA set to report Q1 earnings after Tuesday's market close and hold its analyst day event on Wednesday, traders should buckle their seatbelts for some major volatility this week.

According to Bank of America analyst Vivek Arya, volatility is the name of the game for semiconductor stocks so far this earnings season.

“The majority of semi stocks have faced pressure after they reported, for various unrelated reasons,” Arya explained. “In other words, there are plenty of factors that could inject volatility in NVDA stock, even if fundamentals remain strong.”

Related Link: Gearing Up For Nvidia's Q1 Earnings: A Technical Take

In addition to this week’s events, Nvidia shares could also react to commentary from rival Advanced Micro Devices, Inc. AMD’s analyst day on May 16, news from the Computex tradeshow on May 30 and the annual Russell rebalancing ahead in June.

For investors willing to weather the near-term volatility, Bank of America names Nvidia as one of its top stock picks based on the company’s unique positioning in several key high-growth markets, including artificial intelligence, gaming, virtual reality and autonomous cars.

Arya notes that, unlike many semiconductor peers who have relied on M&A in recent years, Nvidia’s impressive growth has been organic. Arya admits that Nvidia’s multiple expansion in recent years has created downside risk as low as $85 per share if the company’s growth slows in coming quarters. However, if the company remains on track, Bank of America projects earnings per share in the $5-$6 range by 2020, suggesting a valuation of $150-$175 per share.

After being one of the hottest stocks in the market in recent years, Nvidia shares have cooled so far in 2017, down 3.0 percent on the year.

Image Credit: By yoggy0 from Yokohama, Japan (SIGGRAPH Asia 2009) [CC BY 2.0], via Wikimedia Commons