Chip designer Nvidia has a near-perfect IBD Composite Rating of 98. The California-based company and leader in artificial intelligence and is also a key player in self-driving cars and cloud gaming. Nvidia also pioneered graphics processing units, or GPUs, to make video games more realistic.
Nvidia earnings and sales rebounded in 2020 after sharp declines in much of 2019. So far this year, the chip designer has posted 63% to 105% year-over-year earnings growth. Sales growth ranged from 39% to 57% in the past four quarters, including an accelerating trend the past couple of periods.
Analysts expect the company to show EPS growth of 48% for the January-ending quarter, with earnings of $2.80 a share on sales of $4.81 billion, according to IBD data. That would represent a revenue increase of 55%.
Analysts see the company’s earnings for the fiscal year ending in January growing 68% to $9.70 per share, and 19% in the next fiscal year.
“Nvidia is firing on all cylinders, achieving record revenues in gaming, data center and overall,” Jensen Huang, founder and CEO of Nvidia, said in a statement. He also noted that demand for the new Nvidia GeForce RTX GPU (graphics processing unit) is “overwhelming.”
Growth Stocks Building Bases: Nvidia
Shares of this IBD 50 growth stock and IBD Leaderboard stock are forming a new flat base with a 587.76 buy point. Nvidia has been trading around the 50-day moving average but so far has not been able to make a decisive move above it.
The base is third stage, so gains from the next breakout may not be as large as from earlier bases.
Nvidia stock’s relative strength line has been trending slightly lower since mid-October, lagging the stock price. Ideally, the RS line — which compares a stock’s performance with that of the S&P 500 — will be at or near new highs as the stock breaks out.
On the positive side, Nvidia saw its mutual fund ownership at the end of the July quarter reach 3,944 funds, up from 2,612 in the year prior, according to IBD data.
Finally, Nvidia’s Relative Strength Rating of 87 is above the minimum of 80 we like to see for growth stocks breaking out.
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