Trading NVIDIA’s 45% Surge Post Q1 Earnings Report
It is no secret that technology stocks have had a rough time so far in 2022.
In the midst of surging inflation, interest rate rises and general economic uncertainty, investors are ditching risky, expensive growth stocks in favour of safer, defensive stocks.
This recent trend can be seen clearly in the NASDAQ-100 Technology Sector Index which, as of 31 May, has fallen more than 26% since the start of the year.
For those with less experience in the stock market, such sell-offs and market volatility are often cause for concern. However, in some cases, dips in the market can present investors with the opportunity to pick up quality stocks for cheaper prices.
Amongst the large number of tech stocks which have suffered in 2022, chip-making giant NVIDIA has not escaped the recent market downturn unscathed. As of 31 May, the NVIDIA share price was down a whopping 36% for the year. However, in the two days after the company released their first quarter results last week, the stock rose almost 11%.
Does NVIDIA have what it takes to continue to recover this year? Keep reading to learn more about the prospects of the NVIDIA share price over the next 12 months and how you can trade it.
|Symbol for Invest.MT5 Account:
|Date of Idea:
|1 June 2022
|6 - 12 months
|Position Size for Invest.MT5 Account:
- The Invest.MT5 account allows you to buy real stocks and shares from 15 of the largest stock exchanges in the world.
All trading is high risk and you can lose more than you risk on a trade. Never invest more than you can afford to lose as some trades will lose and some trades will win. Start small to understand your own risk tolerance levels or practice on a demo account first to build your knowledge before investing.
Why Trade NVIDIA Stock?
Founded in 1993, NVIDIA is a technology company which designs integrated circuits, most well-known for its high-end Graphics Processing Units (GPUs). The company mainly focuses on four core markets: gaming, automotive, data centre and professional visualisation.
Last week, NVIDIA released their Q1 results for the fiscal year 2023. In the three months ending 1 May 2022, NVIDIA reported record quarterly revenue of $8.29 billion and Earnings per Share (EPS) of $1.36, year on year increases of 46% and 49% respectively.
However, despite these results comfortably beating analyst expectations, the NVIDIA share price initially dropped 5.5% in after-hours trading due to a weaker than expected forecast for the current quarter.
Wall Street analysts had previously expected NVIDIA to generate around $8.5 billion in revenue this quarter, but the company announced that they expect this figure to actually come in at $8.1 billion, down from the $8.29 billion in Q1. This predicted fall in revenue reflects the impact of exiting the Russian market and the negative effects on Chinese demand caused by continued Covid-19 lockdowns.
Whilst these concerns may weigh on investor sentiment in the coming months, the longer-term picture looks more positive, which was reflected by the share price’s recovery in the days following its results.
It’s important to note here that, even though NVIDIA’s revised revenue forecast was weaker than anticipated, if achieved, it would still represent year-on-year growth of 24%, which is an impressive figure given the current headwinds.
Even more impressive is the performance of NVIDIA’s data centre business, which really drove their positive results in Q1. Revenue from this business grew 83% year-on-year and accounted for more than 45% of total Q1 revenue. This growth was thanks, in part, to an increase in demand for NVIDIA’s GPUs by cloud computing and hyperscale customers.
Furthermore, although the company cited a softening in gaming market demand, they still reported record revenue of $3.62 billion, a year-on-year increase of 31%.
With total revenue forecast to increase and impressive growth in their data centre business, it would not be a surprise to see NVIDIA’s share price rise over the next 12 months. However, traders must weigh the potential headwinds that the company faces, particularly rising inflation, which could negatively impact consumer demand over the coming months.
NVIDIA Stock Forecast - What Do the Analysts Say?
According to analysts polled by TipRanks for an NVIDIA stock forecast in the last 3 months, there are currently 27 buy, 5 hold and 0 sell ratings on the stock. The highest price level for an NVIDIA stock forecast is $410.00 with the lowest price target at $165.00.
The average price target for an NVIDIA stock forecast is $271.41 which represents a 45% upside from the current levels, at the time of writing.
An Example Trading Idea for the NVIDIA Stock Price
An example trading idea for the NVIDIA stock forecast could be as follows:
- Buy the stock on a break above $200.00 to allow for current market volatility.
- Target just below the average analyst price target at $271.00.
- Keep your risk small at a maximum of 5% of your total account.
- Timeline = 6 - 12 months
- If you buy 10 NVIDIA shares:
- If target is reached = $710.00 potential profit ($271.00 - $200.00 *10 shares).
It’s wise to remember that the share price is very unlikely to go up in a straight line and it may even go much further down before, and if, it rises. This is particularly important to bear in mind considering the stock market sell-offs we have witnessed so far in 2022.
Therefore, be sure to exercise good risk management, which is of the upmost importance when trading. You should always know how much you could potentially lose on a trade and the risks involved.
Another factor to consider is the commission, as this can eat into your profits. With the Admirals Invest.MT5 account you can buy US stocks from $0.02 per share. This means buying 10 shares in NVIDIA stock would result in a commission of $0.20 ($0.02 * 10 shares).
There is a low minimum transaction fee of $1. So, the example trading idea above would result in a total commission of just $1!
How to Buy NVIDIA Stock in 4 Steps
- Open an account with Admirals to access the Trader’s Room.
- Click on Trade on one of your live or demo accounts to open the web platform.
- Search for NVIDIA at the bottom of the Market Watch window and drag the symbol onto the chart.
- Use the one-click trading feature, or right-click and open a trading ticket to input your trade size, stop loss and take profit level.
Click on the banner below to buy NVIDIA stock today! ▼▼▼
Do You See the NVIDIA Stock Price Moving Differently?
Remember that all analytics and trading ideas are based on the personal view and experience of the author.
If you believe there is a higher chance of NVIDIA’s share price moving lower, then you can also short sell the stock using CFDs (Contracts for Difference) with Admirals.
This means you can trade long and short to potentially profit from rising and falling share prices. Learn more about CFDs in our How to Trade CFDs article.
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