NVIDIA Will Set a New High Soon, Then Keep Rallying, Here's Why NVIDIA's Q1 release reassured a worried market that the AI boom isn't over, growth will continue, and the profits will flow.
This story originally appeared on MarketBeat
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NVIDIA's (NASDAQ: NVDA) stock price will soon set a new all-time high if it hasn't by the time this article is read. The reason why is that the Q1 release laid to rest fears centered on China restrictions, AI demand, and the strength of core semiconductor businesses.
The key takeaways for investors and traders are that the results were strong even without China; adding the lost revenue into the picture makes Q1 another impressive event in a string of market-wowing reports, and the guidance is equally solid.
While slightly below the analysts' consensus, the loss of China revenue and expectation for ramping business in Saudi Arabia and other recently unlocked markets more than offset it.
Ultimately, regardless of AI and NVIDIA's position within the industry, this company is generating substantial profits, which serve as a strong catalyst for stock prices. Regarding profits, the company's net profit increased by 26% to $18.7 billion, despite the impact of China.
That resulted in a $10.4 billion increase in cash on the balance sheet, a 25% gain, leaving the company with over $53.6 billion in cash on hand.
NVIDIA's Forecast for a Minimum 25% Upside is Firming
The analysts' response to the news is telling. MarketBeat tracks a single price target reduction; however, the negativity is offset by the new target price of $186, which is well above the consensus estimate, and the other 12 revisions tracked within the first 18 hours of the release.
They include 12 price target increases and an upgrade to a Buy rating. The critical takeaway is that the consensus of new targets and the trimmed set equal $167, above the consensus estimate ahead of the release, with 61% of the targets leading to the high-end range. That puts this market in the $220 region, a gain of roughly 65% from the pre-release price points, and possibly reached before the end of the year.
The initial market response has also been positive. The stock price began to rise immediately after the release and continued to show strength into the premarket session the next day.
The market for this stock is indicated to open at least 5% above its pre-release close, sufficient to put it above a critical resistance target. In this scenario, there is only one thing standing between this market and the next leg of its uptrend: resistance at the all-time high.
Assuming that level is broken, NVIDIA's market has a clear path forward and can easily reach the $180 level by mid- to late-summer.
NVIDIA's Price Action Confirms a Bullish Flag Continuation Pattern
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The chart set up is very bullish. NVIDIA's market rebounded from tariff-induced lows in April and May, forming a Bullish Flag in late May. The post-release action confirms the flag as a continuation signal and activates a target movement equal to the flagpole.
The flagpole is worth nearly $50, sufficient to put this market at the $185 level. The timing of the move is questionable. However, the flagpole formed in about six weeks, which is a likely timeframe for the post-release advance.
Institutions may be the deciding factor. They own about 65% of the stock and have been buying on balance this year. They provide a solid support base and tailwind for price action that would undercut the rally if removed. However, with the company generating profits in this manner, that is unlikely.
The expectation is that NVIDIA will soon begin to accelerate its capital return, which may include increased dividend distributions and share buybacks. As it stands, the dividend is a token amount, allowing dividend-only funds and managers to participate. The buybacks are more substantial, reducing the share count by more than 1.1% on average for Q1.
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