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After being hammered by investors since early 2022, tech stocks finally got a break recently. Nasdaq Composite It fell to 18.3% year-over-year, while the tech barometer found inflation of 11.4% in July, better than expected last month.
Still, many of the biggest tech businesses, e.g Nvidia Corporation (NVDA -2.88%), especially stay in the red. The chipmaker’s stock is down 39 percent since the start of the year, which should be of interest to long-term tech investors. With that in mind, is now the right time to jump on the tech giant’s stock? Let’s take a look at his current situation to find out why and wherefore.
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Nvidia will face a bumpy road in the short term
Nvch, primarily known for designing and manufacturing graphics processing units (GPUs) for gaming, cryptocurrency mining and various business applications, recently announced weaker-than-expected first-quarter results. In the year The company, which will report full earnings on August 24, said in a press release that its second-quarter revenue could end at $6.7 billion, up from $8.1 billion earlier. The tech behemoth attributes the weakness to weak gaming revenue, which is largely generated by sales of top-of-the-line GPUs.
The lower revenue forecast for the gaming segments is likely related to macroeconomic factors such as higher inflation and rising interest rates, which have temporarily softened demand for GPUs. As a result of management’s revised guidance, Nvidia’s gaming revenue, which accounted for 46 percent of last year’s total sales, is expected to decline 30 percent year-over-year to $2.04 billion. Overall, the newly guided total revenue forecast translates to $6.7 billion, a 3 percent increase from the same quarter a year ago.
Currently, the tech giant has a price-to-earnings multiple of 51.0, which marks the lowest trading level since the initial March 2020 Covid-19 outbreak. For starters, it’s trading below the average price-to-earnings multiple of 59.0. Whenever a high-quality stock like Nvidia dips below its historical valuation levels, it’s usually not a bad idea to take a closer look. While future growth may be modest, the long-term fundamental vision of the company’s business remains unchanged. Additionally, Wall Street analysts still forecast the tech leader’s top and bottom lines to grow 15.3% and 20.3% year-over-year for the fiscal year. Those are still strong growth rates, so investors should think twice before getting overly excited about the new news.
But is the stock a good buy today?
Showing a 21% share of the GPU market, in second place Intel, Nvidia is poised to take advantage of the booming industry. According to Allied Market Research, the global GPU market will be worth $201 billion by 2027, which translates to a compound annual growth rate (CAGR) of 33.6% from 2021.While inflation and rising interest rates have temporarily dampened demand, these headwinds are diminishing. It is only short-term in nature and should not affect your long-term investment in Nvidia. Hence, the recent rally in the tech giant’s stock price has introduced a good buying opportunity for investors.
Luc Meindl has no position in the shares mentioned. The Motley Fool has positions and recommends Intel and Nvidia. The Motley Fool recommends the following options: long January 2023 $57.50 calls on Intel and short January 2023 $57.50 puts on Intel. The Motley Fool has a disclosure policy.
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