NVIDIA Corporation (NVDA) shares rose near prior highs on Thursday before ending the session on a moderately negative note. The company’s artificial intelligence and cloud computing ambitions have propelled the stock more than 50% higher this year. But some investors believe that its price-to-earnings multiple has become over-extended at more than 50x earnings. NVIDIA’s success will depend on its ability to continue beating optimistic analyst expectations.
Analysts remain confident in the GPU maker’s prospects. For instance, RBC Capital reiterated an Outperform rating and $175.00 price target on the stock, citing 10% growth in global server shipments and growing demand from tech giants like Amazon.com, Inc. (AMZN) and Microsoft Corporation (MSFT). SunTrust Robinson Humphrey also upgraded the stock to a Buy from a Hold with a $177.00 price target, citing expectations for company-wide revenue and earnings per share upside this year. (See also: NVIDIA’s Innovations Prompt SunTrust Upgrade.)
From a technical standpoint, the stock retested prior highs at around $165.00 after briefly falling near its 50-day moving average at $141.52. The relative strength index (RSI) appears lofty at 63.33, but the moving average convergence divergence (MACD) could see a bullish crossover in the near term after a prolonged downtrend. Traders should maintain a bullish bias on the stock given its momentum, although it could see some consolidation.
Traders should watch for a breakout from upper trendline resistance to R2 resistance at $178.11. With the RSI trending near overbought levels, traders could see some further consolidation between the pivot point and trendline resistance before a significant breakout from the ascending triangle pattern that has formed. A failure to break out could lead the stock to retest its trendline and pivot point support at $151.72. (For more, see: NVIDIA Bulls Back in Charge.)
Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.