Nvidia Corporation’s (NASDAQ:NVDA) strong fourth-quarter results were insufficient to inspire a bullish run as the stock fell 3.25% in Thursday premarket. Nvidia had posted a revenue of $7.64 billion, compared to an expected $7.42 billion, representing a growth of 53% from the prior year. The company reported sales of $3.26 from its data center business, up 71%. What went wrong?
Nvidia’s stock hesitation after the robust quarter results can be attributed to profit-taking by investors. The stock has been surging this month, having risen from a low of $230 on the first day after a breakout from a pin+inside bar combo to the current $265. This suggests that investors had already priced for guidance beating earnings at the back of a strong chip demand.
Nvidia finding resistance at $270
Source – TradingView
From a technical point of view, Nvidia may have also met resistance at $270 in the recent gains and could only be correcting amid the quarter results. The level at 270 acted as support before the price broke lower in mid-January.
This is the same level where the 20 MA meets the price. Nonetheless, the 200 MA remains below the 20 MA, suggesting that the stock remains on a strong uptrend.
Is Nvidia risky at the current level?
Nvidia’s P/E ratio of 80.7 may have scared investors who may see it as an overvalued stock. However, in the earnings release, the company guided revenue of $8.1 billion in the first quarter of 2022, more than estimates of $7.29 billion.
There is no doubt that the company will meet the ambitious target given the strong chip demand. As a result, a forward P/E ratio of 51.18 looks achievable and would lower valuation concerns, although the stock will still be trading at a premium.
Conversely, Nvidia is a good buy on a retracement towards the $221 support or 200 MA, if it fails to break above the $270 resistance.
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