NVIDIA (NVDA:NASDAQ)
Price at Preparation: $121.79 (June 10th, 2024)
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What they do
NVIDIA Corporation (NVDA:NASDAQ) is a full-stack computing infrastructure company engaging in the design and manufacture of computer graphics processors, chipsets and related multimedia software. The company accelerates computing to help solve the computational problems. NVIDIA’s segments include Compute & Networking and Graphics.
- Compute & Networking include its data center accelerated computing platform; networking; automotive artificial intelligence (AI), cockpit, autonomous driving development agreements and autonomous vehicle solutions; electric vehicle computing platforms; NVIDIA AI Enterprise and other software.
- Graphics include GeForce GPUs for gaming and personal computers (PCs), the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms; Quadro/NVIDIA RTX GPUs for enterprise workstation graphics; virtual GPU (vGPU), software for cloud-based visual and virtual computing; automotive platforms for infotainment systems; and omniverse enterprise software for building and operating metaverse and three-dimensional Internet applications.
Welcome to this week’s Theta Bandits: Top Pick Tuesday. We strive to bring you free content, searching the markets to get ahead of what we think could be new potential winners for any portfolio.
Opinion
The primary reason for this week’s research is due to the NVIDIA 10:1 stock split which occurred June 7th, 2024. History does not always repeat, but tends to rhyme – Companies like AMZN and GOOG also split, both at 30:1. Post split both companies gave investors a better buying opportunity post split vs the price at the stock split and today both companies are close to doubling their stock price from their rebounds off the bottom – this is the type of opportunity that we are looking to “rhyme”.
As part of due diligence, included below in the chart shows the NVDA street consensus with a majority of analysts as a strong buy / buy, a few holds and no sells. The analyst 12-month Price Target (PT) has a very wide margin as follows:
- Low: $65.50 USD (-46.22%)
- Average: $124.26 USD (+2.03%)
- High: $150.00 USD (+23.16%)
A caution against the PT’s shown, which is a good reminder that market predictions are never 100% accurate and it is prudent to ensure this trade fits your personal risk profile before proceeding. Note the disconnect in the actual results of AMZN and GOOG since their split in comparison to the current analyst opinions shown and be prepared to act and adjust a position to account for added information.
Plan
Using the visual aid below, the following colours are used:
- Blue: 52-week high.
- Red: 52-week low and a potential buy target.
- Green: 12-month PTs (low, avg, high).
- Orange: Support/resistance lines.
- White: Trend line.
- Yellow: Our potential plan targets.
Before we start a plan, take note of the 52-week high, this spike looks to be an anomaly, could be from the split data coming through, however should have little weight on the overall plan.
From the Opinion section above, we are looking to hopefully take advantage through stock weakness before a recovery. Let’s explore two approaches:
Conservative: For the conservative investor, buying stock in stages using Dollar Cost Averaging (DCA) is a great tool. The goal is to have an allocation of stock, this can be separated into three and buy the first section at the current price, the second section when the price is at the white trend line, as this is also a form of support to rebound from. The final section aimed at the red Target (buy) support line around at $101.54 USD area. Once in the position, the marked yellow Targets which are resistance levels, serve as guidance to secure profit on the way up – a fantastic way to mitigate risk on the trade.
Aggressive: For the aggressive trader, using options is a great mechanism to make money in the short term while planning the potentially bigger purchase down the road at the option expiry. As discussed in previous Top Pick Tuesdays – initially selling a cash secured put (CSP) will give a premium immediately in your pocket while setting the price willing to be paid for the stock at option expiry. Each contract taken will equate to 100 shares at the price of the strike set at CSP sell, so this method does take more capital to employ. Use the support / resistance lines as a guide to optimize the premium to collect vs the price willing to pay for the contract. As with the conservative approach once in the trade with stock, use the yellow targets (resistance levels) to guide securing profit.
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RISKS
The goal is to grow capital by securing profits and limiting losses. There are multiple strategies discussed in the article today, make sure to plan to trade within your risk tolerance, allowing time for success while updating limits and exit points to mitigate risk.
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Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.
