Nvidia recovers 22% in a month, but how sustainable are the gains?
- Nvidia has surged by 22% in a month ahead of Q2 earnings.
- Nvidia has a PEG ratio of 2.67, higher than the semiconductor sector.
- The stock is trading close to resistance with a potential breakout.
Nvidia Corporation (NASDAQ:NVDA) rose 3% on Friday, taking the total monthly recoveries to 22.6%. The gains came after rival SMIC saw a 42% increase in revenue in the second quarter. Nvidia reports earnings on August 24 after the market close. The consensus EPS for the company is $0.53, lower than $0.89 last year. The lower projections reflect slowdowns in the semiconductor sector after booming in 2021.
Nvidia’s gains in the month come amid concerns of slowdowns in the semiconductor sector this year. On August 8, the chip maker said it expects a lower second-quarter revenue of $6.70 billion. The preliminary second-quarter revenue is lower than the previous $8.10 billion projection. The downgrade reflects falling demand for gaming products amid macro issues. Following the downgrade, Blayne Curtis, Barclays analyst, cut the price target from $295 to $200.The target represents an upside potential of just 3% from the current price.
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On valuation, Nvidia carries a PEG ratio of 2.67. The PEG is higher than 2.00 in the general semiconductor industry. That suggests that the stock is overvalued, and investors may be skeptical. However, Nvidia remains one of the industry heavyweights.
Nvidia edges closer to the resistance after the monthly gains
Technically, Nvidia’s established resistance is at $196. The stock trades at $184 in bullish momentum. The 21-day and 50-day moving averages joined support recently for the first time since April. The stock has upside potential, but a break above $196 will depend on the quarter results.
Nvidia could continue rising. The stock will face resistance at around $196. A break above the resistance will depend on the quarter results.