Can Nvidia Investors Expect More Upside in the Stock?


Dec. 27 2019, Updated 3:15 p.m. ET

Nvidia stock (NVDA) closed trading at $239.19 on December 26, up 0.24% from the previous trading session. The stock’s performance lagged behind the S&P 500’s (SPX) 0.51% rise that day. And the Dow Jones Industrial Average (DJIA) rose 0.37% while the tech-forward Nasdaq climbed 0.78%.

Also, since my last post about NVDA, Why Nvidia Stock Could Rise after Q3 Earnings, the stock has risen from $208.57 to $239.19. This divergence means stock price appreciation of about 14.6%.

What’s more, Wells Fargo analyst Aaron Rakers boosted his NVDA price target to $270 from $240. After this news, the stock faced a few bullish bets from options traders over the past week.

So let’s take a closer look at Nvidia’s recent price target revision, institutional buying and selling over the past quarter, and recent moves from options traders. My aim here is to see whether the stock could jump higher. 

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Nvidia stock got a price target boost from Wells Fargo

Aaron Rakers, an analyst at Wells Fargo, increased his price target for the stock to $270 from $240. At the same time, he favored Nvidia as his “top semiconductor idea into 2020.” Rakers also maintained an “overweight” rating on NVDA based on optimism for the stock’s performance next year.

NVDA institutional ownership and institutional transactions

Institutional ownership in Nvidia is approximately 67.83% of diluted shares. And most of these shares are in the hands of The Vanguard Group, which owns around 45,66 million shares or 7.46%. Next are Fidelity Management & Research Company, BlackRock Fund Advisors, and SSgA Funds Management. They have about 7.35%, 4.59%, and 4.03% shares, respectively. The rest of the owners hold relatively small stakes.

According to CNN Business, institutions bought approximately 10,14 million NVDA shares. And only 4.9 million shares sold over the past three months.

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Options traders keep making big, bullish bets on Nvidia stock

The open interest levels for the January 17 $240.00 calls saw bullish buying over the past week. According to Barchart.com, the open contracts rose by about 2,000 contracts to 10,695. So Nvidia stock is looking to me like a large, bullish bet. The transaction represents a total dollar value of about $7 million.

A buyer of the calls would need NVDA stock rise to $246.35 by the expiration date so they could break even. And that rise would mean a gain of about 3% from NVDA’s current price. 

Also, the open interest levels for the January 17 $255.00 calls surged last week as well. According to Barchart.com again, the open contracts rose by about 600 contracts to 2,178. Nvidia’s open interest represents a total dollar value of about $300,000. So a buyer of these calls would need NVDA to rise to $256.00 by the expiration date, meaning a gain of around 7% from NVDA’s current price.

Analysts’ coverage and target prices for Nvidia

For the most part, Wall Street analysts have upgraded Nvidia stock over the past six months. The consensus price target was $219.82, which represents a 7.19% downside. According to TipRanks, NVDA is a “moderate buy” with an average price target of $239.48, representing 0.12% upside.

And finally, among the 29 analysts covering NVDA, 22 recommend it as a “buy,” six recommend it as a “hold,” and one analyst recommends it as a “sell.”

If you’re interested in more of my technical analysis, please take a look at Why AAPL Stock Could Take a Hit in 2020General Electric Options Traders Betting on a Bullish Jump, and Could Intel Stock Reach New Highs?


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