Relax first bro. Talking about the market never ends, especially when you find hot news on the timeline that makes you scratch your head. Recently, Coin Bureau dropped a warning that Nvidia's credit risk is surging hard and hitting levels close to their record high.
For the summary of the data, Nvidia's 5Y CDS spread is now at 79.8 bps. This extreme increase jumped more than two times compared to the end of may, and it's just a tiny bit below their record on july 29 which hit 83.7 bps. This surge in the cost of insuring against default makes a lot of people worried, wondering if the AI hype is increasingly debt fueled and circular rather than driven purely by organic demand.
Crazy Valuation But Covered By Insane Profit
If we peek at the financial reports, the size of Nvidia's business is already on a totally different level. Their market cap has touched $5.27T with an enterprise value around $5.20T.
Behind the price that looks expensive with a trailing P/E at 33.32 and forward P/E at 24.81, their business performance is literally speeding without brakes. Their profit margin smashed 62.97%, while return on equity or ROE is hanging out at an amazing level of 114.29%. This proves that management is super good at spinning capital to print net profits.
Analyst Views And Wallet Price Targets
Analysts on Wall street are also compact in giving full support to this tech giant. Most financial institutions are still slapping buy recommendations without any meaningful shady sentiment.
Take Rosenblatt for example, giving a high confidence score of 82/100 with a buy rating. The average price target from the analyst consensus even breaks around $302.83, way above the current market price hanging out at the $217.50 level. Wells Fargo just gave a confirmation of their bullish view with a price target at $315.
Moving over to technical analysis on the daily timeframe, nvidia's price action shows a super interesting structure after getting hit by selling pressure a while ago.
The chart formed a double bottom pattern around June to August, which usually becomes a strong signal for a trend reversal to bullish. The price is now sitting at $217.50, moving stably above the 50 day moving average line. The stochastic indicator is also spotted starting to climb out of the oversold area, giving breathing room for a continued push.
If we look from the 4H timeframe, the price structure builds a neat ascending channel pattern inside a positive trend corridor. Higher high and higher low patterns are consistently formed neatly post the bottoming phase yesterday.
Even though the momentum indicator briefly showed a slight saturation signal at the top, the overall trend still shows buyers holding control. Strong support areas around $177 - $173 so far still function super solidly as a price cushion if there is ever a healthy correction along the way.
Basically, if we draw a conclusion from all the data, on one hand, nvidia's fundamentals and chart structure are still really solid and showing a strong uptrend, but on the other hand, we still need to stay alert to the spike in credit risk and high valuation so our funds stay safe.
⛔Disclaimer - This analysis is for educational purposes and reflects personal opinion only, not financial advice. Always practice risk management and use stop losses according to your own risk tolerance.
Posted Using INLEO
