The Nvidia share price has come under intense scrutiny as investors worry about the company’s growth. The NVDA stock is trading at $222, about 35% below its all-time high of $345. Its market cap has dropped to $538 billion. This year, it has fallen by 25% and underperformed the iShares Semiconductor ETF (SOXX).
Is Nvidia the next Cisco?
Nvidia is one of the biggest companies in the world, with a market value of over $538 billion. According to Companies by Market Cap, it is the 9th biggest company globally and is sandwiched between Meta Platforms and Taiwan Semiconductor. However, the company does not come close when you rank it by revenue and profitability. In 2021, its total revenue jumped to more than $29 billion, ranking it at position 386 globally.
The extreme valuation of Nvidia comes from the fact that it is having a strong growth trajectory as demand for its GPUs rise. Its total revenue has risen from less than $9.7 billion to more than $26 billion. Its profitability has also risen to more than $9.5 billion.
As a result, there is always chatter about Nvidia’s valuation, considering its stock has always been priced for perfection. For example, it has a TTM price to sales ratio of 20.59x, significantly higher than the average. For example, Taiwan Semi has a ratio of 8.6 while Intel has a multiple of 2x. The same applies to its forward price to earnings ratio, which stands at 49.7.
Proponents believe that the Nvidia share price has more room for growth as the world becomes more advanced. Besides, its chips are found in all products like Bitcoin miners, gaming rigs, and autonomous cars. However, opponents believe that Nvidia’s performance mirrors that of Cisco, which was once the biggest tech firm in the world. At the time, most people believed that Cisco’s business would grow to perpetuity. Today, Cisco is a shadow of its former self and is trading at a PS multiple of just 1.
Nvidia share price forecast
Turning to the daily chart, we see that the Nvidia stock price has declined sharply in the past few months. At the current price, the stock is sitting slightly above the important support level at $207, which was the lowest level several times this year. It has also moved below the 25-day and 50-day moving averages.
Therefore, a move below this support will mean that sellers have prevailed and that the stock will keep pushing lower. This will likely happen towards its earnings on May 25th. On the other hand, a move above the resistance at $250 will signal more buyers left in the market.