Nvidia Receives Upgrade From Morgan Stanley

Nvidia Corp. (Ticker Symbol: NVDAWealth Strength IndexAAPL is Extremely Up and trending Up) was on the receiving end of an upgrade from Morgan Stanley.  The American multinational investment bank and financial services company upgraded Nvidia to overweight from equal weight.  Morgan Stanley thinks the stock has more room to run higher in 2020 after a solid performance so far this year.  Nvidia has seen its stock appreciate due to the growing demand for gaming chips and parts used in data centers.

This comes on the heels of its most recent quarterly earnings report that beat analysts consensus.  The Santa Clara, California-based company reported an earnings per share beat of $1.45 per share vs. Wall Street analysts’ expectations of  $1.58 per share.  Additionally, Nvidia reported a revenue beat of $3.01 billion vs. Wall Street analysts’ expectations of $2.92 billion.  The company also improved its gross profit margin to its widest levels in over 18 months, putting a stop to the decline from over the last year.

The above image is a chart of Nvidia’s stock price over the past two years.  The stock started out in 2018 drifting higher.  The stock choppily traded in an uptrend, making a series of higher highs and higher lows before finding some price resistance around the $290 price level.  Nvidia began putting in a bearish divergence between price and its Relative Strength Index while also forming a sell signal on its MACD.  The stock proceeded to breakdown through its uptrend and cross below its 50-day moving average and continued to sell off the remainder of the fourth quarter.  At the start of 2019, Nvidia had a slight rebound but then began to form a head and shoulders reversal pattern.

Some traders use what’s called a “measured move” to try and project where the stock could possibly go in the future based on breakouts and measurements from technical formations.  In Nvidia’s case, one would take the top price from the head of the pattern (roughly $194) and the price of the neckline from the pattern (roughly $172) then subtract them to get the difference

($22). The difference is then projected from the neckline in the direction of the breakout to project the price of the measured move (Neckline – Difference = Measured Move). In Nvidia’s case, the projected price target from the head and shoulders pattern was roughly $150.00, which the stock shortly after breaking out from that pattern.

The stock continued to sell off and bottomed out just above the 2018 lows around the $130.00 price level.  Nvidia proceeded to grind higher over the next six months finding dynamic support twice near its 50-day moving average.  Currently, the stock is up nearly 50% for the year and is trading above its major daily moving averages.

(Chart above courtesy of ​www.tipranks.com​)

Based on a survey of 14 analysts offering 12-month price targets, the average price target for Nvidia’s stock is $232.42. According to that number, the stock is priced at a discount relative to Wall Street analysts and could be considered undervalued around current levels near $210.94

Investors in the semiconductor space should look to Nvidia’s next earnings release on February 16th for fresh news within the sector.

 


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