NVDA Stock Forecast: Nvidia Is Overweight And Obese, Sell It Now

 Know First has a very bullish 1-year signal for Nvidia (NVDA). However, I conclude NVDA is obese at 62.51x forward GAAP P/E. Nvidia’s stock is +220.88% since my last buy recommendation for it. NVDA is +4,153.73% since my first buy recommendation. After 23 Seeking Alpha buy recommendations for NVDA, I am endorsing it as a sell. I downgraded NVDA from Overweight to obscenely obese. I Know Nvidia will most likely report outstanding revenue and EPS numbers today. I still conclude NVDA is obese/overpriced.

Cash out your massive paper profits on NVDA. Use that profit to buy more affordable stocks like Intel (INTC), Taiwan Semiconductor (TSM), Qualcomm (QCOM), and Advanced Micro Devices (AMD). The irrational exuberance has made NVDA over-inflated.  NVDA is now mired in a stratospheric TTM P/E valuation of 90x and above.

(Source: Finbox Premium)

NVDA might fall hard if China’s Communist Party rejects its $40 billion takeovers of ARM Holdings. ARM China is already embroiled in a war against its ARM Holdings UK sibling. Beijing-backed investors are among those who bought majority control of ARM China from SoftBank (SFTBY).  

The comparative chart below clearly illustrates NVDA is obese and too expensive. I can only give NVDA a Neutral rating if it loses weight down to 49x Forward P/E – same as AMD has.

(Click on image to enlarge)

(Source: Seeking Alpha Premium)

Overpricing Nvidia significantly higher than AMD is misplaced bias. AMD is successfully reducing the x86 processor market share of Intel. AMD can refocus and become more aggressive in disrupting Nvidia’s 81% market share in discrete GPUs.

AMD’s Ryzen and EPYC x86 processors are why Intel is handicapped by decreasing profitability/margins. NVDA’s lofty valuation ratios will gradually fall down after AMD Instinct MI100 starts forcing Nvidia to reduce the average selling prices of its expensive GPU accelerators. Nvidia used to tout a net income margin higher than 37% in 2018. AMD’s consumer and data center GPUs are why Nvidia’s net income margin is now just around 27%.

Like Intel, Nvidia is obviously reducing price tags for its GPUs. Price reduction slows down AMD’s advances.

(Source: Seeking Alpha Premium)

AMD is making Intel and NVDA less profitable. AMD is doing this while increasing its net income margin. This achievement should inspire investors to be irrationally exuberant for AMD, not NVDA. Dr. Lisa Su deserves to win the Best CEO of the 21st Century award.

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