From Yahoo Finance: 2024-04-11 10:16:00

Shares of Nvidia (NVDA) have dropped 11% from their 52-week high of $974, prompting investors to consider buying the dip. Despite impressive sales and earnings growth, the stock’s premium valuation raises concerns about increased risk for shareholders. Nvidia’s bull case emphasizes its outstanding revenue and earnings momentum, supported by strong growth in the AI chip space. The company’s earnings growth forecast of 38% per year for the next five years justifies its current valuation.

However, Nvidia’s bear case highlights the unpredictable nature of its long-term earnings growth trajectory. Intense competition in the AI chip sector could impact margins and lead to cooling earnings faster than sales. Additionally, customer concentration poses a significant risk, as one customer accounted for 19% of total revenue in fiscal 2024, potentially impacting sales trends in the future. The market’s forward-looking nature raises concerns about potential demand weakness affecting Nvidia’s stock performance.

Investors are advised to wait for a more attractive price to buy Nvidia shares, considering the unpredictable future earnings outlook and the possibility of increasing competition. Despite Nvidia’s market-leading position, exercising patience might lead to a better purchase price in the future. The Motley Fool Stock Advisor team does not currently recommend buying Nvidia stock, citing other stocks with potentially higher returns. Their track record shows significant returns compared to the S&P 500 since 2002.



Read more at Yahoo Finance: Time to Buy the Dip?