When NVIDIA (NASDAQ: NVDA) reported fourth-quarter incredibly good earnings on Feb. 8, the stock took off like a rocket ship. Since then, the stock is not holding up on the markets. Hurt by a general sell-off, analyst downgrades worsened the share performance. The sell and short-selling call on the stock does not make much sense.
Nvidia’s revenue grew Y/Y by 34% in Q4 to $2.91 billion. EPS beat estimates by $0.56 a share as the company made $1.72. Analysts responded by setting price targets in the range of $240 to $305. On Mar. 5, Citron added to its short attack on the company, tweeting that it expected a share price below $200 soon. Citing higher competition and customers testing other solutions besides that offered by Nvidia.
Citron’s short call may not hold much water. For example, called Shopify (NYSE: SHOP) a short only to see the stock move higher. The short-selling thesis is vague. Data suggests Nvidia’s ML/DL business is solid. Hyperscale has the support of Google (NASDAQ: GOOGL) and Microsoft (NASDAQ: MSFT). Microsoft is developing an FGPA.
Finally, crypto mining fluctuations will not have much impact on Nvidia’s business because it’s not a core revenue driver. Anything it makes from miners is a bonus.
Takeaway
Nvidia’s growing business will not slow anytime soon. Its P/E multiples may contract, leading to a lower share price. Yet that negative sentiment will not persist indefinitely. When it reverses, NVDA stock will recover.
