I don’t often say this, but I’m delighted that one of my favorite technology stocks is down 7% today. In this increasingly challenging investing environment, this represents a rare buying opportunity.
Shares of NVIDIA (NVDA) pulled back more than 6% after Michael McConnell, an analyst at Pacific Crest, cut his rating for NVDA to “underweight.” As McConnell sees it, NVIDIA has reached desktop graphics card market saturation, and its datacenter business could slow in the summer. Some investors had a kneejerk reaction to the news, despite the fact that the majority of the analyst community disagrees.
I’m not worried about NVIDIA one bit. In fact, I consider this pullback to be a good buying opportunity. The reason why is simple; NVIDIA has simply stunning forecasted sales and earnings. For the first quarter, the consensus estimate is $0.67 earnings per share on $1.91 billion in revenue. This represents 103% annual earnings growth and 46.3% sales growth.
Analysts have also been revising their EPS estimates higher in recent weeks. Over the past 90 days, the first-quarter consensus EPS estimate has jumped more than 6%. This suggests that NVIDIA will beat even these lofty expectations, continuing the company’s winning streak of earnings surprises.
Keeping this in mind, I do not believe that NVDA is headed for a slowdown, and I’m not the only one. NVIDIA is expected to release its first-quarter results in mid-May, and I can hardly wait. I also expect that NVDA will declare its next dividend around that time.
In the meantime, I consider NVDA an A-rated Strong Buy in Portfolio Grader. I also currently recommend NVDA in my Blue Chip Growth newsletter; current subscribers can view my Buy Below price here.