Should you invest in Nvidia as shares trade lower after the stock split?

on Jul 20, 2021
  • Nvidia shares edged lower 0.66% on Tuesday as they started trading at the split-adjusted price.
  • The NVDA stock price had lost more than 8% in the previous week.
  • The pullback presents an opportunity to buy NVDA shares before a rebound. Should you invest now?

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Nvidia Corporation (NASDAQ:NVDA) shares edged slightly lower on the first day of trading at the new split-adjusted price. The company announced a 4-for-1 split in May, sparking a significant rally in the stock price.

However, NVDA pulled back more than 8% last week as investors started to take profits off the split-driven rally. The company has now accumulated a net gain of 42.25% since the start of the year.

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Despite the year-to-date gains of more than 40%, Nvidia looks significantly undervalued based on price-earnings ratios and earnings growth expectations for the year and the next five years.

Is Nvidia stock a buy in Q3 2021?

Stock splits often trigger significant rallies in the stock price. Although Nvidia failed to post gains on the first day of trading at the split-adjusted price, the company’s current valuation multiples suggest now could be a perfect time to invest in NVDA shares.

Nvidia trades at an attractive trailing P/E ratio of 22.26, making it a compelling investment opportunity for value investors. The company’s earnings growth forecast for this year of about 52.50% prices the stock at an even more exciting forward P/E ratio of just 10.85.

Analysts also expect the company’s bottom line to grow at a compounded annual growth rate of 26.84 for the next five years, making NVDA an attractive stock to growth investors. 

Therefore, Nvidia looks like an exciting stock to buy in Q3 2021 ahead of its impressive growth story. Moreover, the recent pullback of more than 8% creates a perfect entry opportunity.

Source – TradingView

Technical overview: NVDA stock price forecast for Q3 2021

Technically, Nvidia’s stock price appears to have recently pulled back after a solid rally. However, the company’s share price bounced back on Monday before Tuesday’s slight decline. 

NVDA’s rebound momentum still looks strong after avoiding falling to conditions. 

Therefore, investors will gain from the current rebound by targeting profits at $197.83 or higher at $209.13. The key support levels are $172.86 and $162.50.

Bottom line: the case for buying NVDA shares now

Nvidia’s current pullback presents a compelling opportunity to buy one of the best technology stocks in the market. In addition, NVDA’s valuation multiples suggest the shares could be potentially undervalued, while the recent stock split will attract event-driven investors. Therefore, it could be best to buy NVDA stock now before the rebound pushes the share price higher.