Investors Still Believe in NVDA Despite Price Drop

Chip maker NVIDIA logged a -4.1% drop yesterday and underperformed the S&P 500 by -2.0% -- but market sentiment around the company remains overwhelmingly positive. The Semiconductors stock is now trading at $122.2 per share and is -37.97% below its average target price of $196.99. Analysts have set target prices ranging from $110 to $320 dollars per share, and have given the stock an average rating of buy.

The market seems to share this optimistic view, since NVIDIA has a short interest of only 1.2% (this is the percentage of the share float that is being shorted). Each short position represents an investor's expectation that the price of the stock will decrease in the future.

When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.

One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of NVIDIA, institutional investors own 65.8% of the shares, which indicates they have a very high stake in the company. What does this really tell us?

Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in NVDA, it probably means they believe it is a solid investment choice.

Overall, there is exuberant market sentiment towards NVIDIA because of its an analyst consensus of strong upside potential, a buy rating, a very low short interest, and an average number of institutional investors. Investors should not base their decisions on market sentiment only, they should also be aware of a stock's fundamentals before committing.

At a glance, here are some essential statistics you may want to know about NVDA:

  • It has a trailing 12 month price to earnings (Eps) of $3.73 per share

  • NVIDIA has a trailing 12 month Price to Earnings (P/E) ratio of 32.8 while the S&P 500 average is 15.97

  • The company has a Price to Book (P/B) ratio of 12.8 in contrast to the S&P 500's average ratio of 2.95

  • NVIDIA is a Technology company, and the sector average P/E and P/B ratios are 26.5 and 5.57 respectively

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The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.