NVIDIA Stock Looks Attractive before Q2 Earnings

NVIDIA (NVDA) will likely report its results for the second quarter of fiscal 2020 on Thursday after the market bell. Analysts expect NVIDIA to post revenues of $2.55 billion in the second quarter—down 18.5% YoY (year-over-year). The company will likely post an adjusted EPS of $1.15—down 40.7% YoY.

Is NVIDIA stock undervalued?

Currently, NVIDIA stock is trading at 29.49x its fiscal 2020 estimated EPS of $5.29. The stock is also trading at 21.94x its fiscal 2021 estimated EPS of $7.11. Analysts expect the adjusted EPS to fall 20.3% in fiscal 2020 and rise 34.4% in fiscal 2021. NVIDIA’s earnings will likely rise at a compound annual growth rate of 12.5% over the next five years. However, the company’s revenues could fall 6.6% in fiscal 2020 and rise 19.7% in fiscal 2021.

NVIDIA stock looks overvalued considering its expected negative earnings growth in fiscal 2020. However, the stock appears undervalued considering its expected earnings growth of 34.4% and its PE ratio of 21.94x for fiscal 2021.

Analysts’ recommendations 

Overall, analysts favor a “buy” rating for NVIDIA stock. Among the analysts tracking the stock, 64.1% recommended a “buy,” 28.2% recommended a “hold,” and 7.7% recommended a “sell.” On average, analysts’ 12-month target price for the stock is $182.07, which implies a rise of 16.7% from its closing price of $156.05 on Tuesday. The stock’s median target price is $185.00.

On August 13, RBC reduced its target price on NVIDIA stock to $190 from $200. RBC kept its “outperform” rating.

Technical levels

On August 13, NVIDIA stock closed at $156.05. The level was 3.0% higher than its previous closing price, 46.7% lower than its 52-week high of $292.76, and 25.4% higher than its 52-week low of $124.46. Year-to-date, the stock has risen more than 16%. The company’s market cap is $95.0 billion.

Based on the closing price on Tuesday, NVIDIA stock was trading 5.6% below its 20-day moving average of $165.22, 2.0% below its 50-day moving average of $159.17, and 6.0% below its 100-day moving average of $166.03. On the upside, the company’s immediate key resistance lies near $159.36. Notably, $151.28 could act as an immediate key support level on a daily basis.

The company’s 14-day RSI (relative strength index) score was 38, which could be approaching the oversold zone. An RSI score below 30 indicates that a stock could be oversold, while an RSI score above 70 indicates that a stock could be overbought.

Read How Is NVIDIA Stock Placed ahead of Its Q2 Earnings? to learn more.