Nvidia stock (NASDAQ:NVDA) dropped more than 8% on Friday last week after competitor chipmaker Advanced Micro Devices (NASDAQ:AMD) reported preliminary sales for the third quarter of 2022.
Should intelligent investors take advantage of Nvidia stock’s dip and acquire it to gain from its long-term growth drivers? Let us investigate.
Nvidia Stock is Now Cheaper Than Before
Following its recent fall, Nvidia stock (NASDAQ:NVDA) is priced at 39 times trailing earnings. While this is lower than the company’s five-year average earnings multiple of 58, it is still higher than the Nasdaq 100’s price-to-earnings ratio of 24.
Given that Nvidia’s profits are forecast to fall in the current fiscal year, and investor sentiment is likely to stay negative due to the PC market’s deterioration and the China ban, Nvidia stock (NASDAQ:NVDA) might fall further. Analysts expect Nvidia will earn $3.37 per share this fiscal year, down from $4.44 per share the previous year. The top line is likely to stay the same at $27 billion.
As a result, intelligent investors might get a better bargain on Nvidia by waiting for the stock to fall more before investing. However, investors should not pass up the chance to purchase Nvidia stock (NASDAQ:NVDA) at a lower price since the business might rebound rapidly.
It is worth recalling that Nvidia was selling at just 18 times trailing profits in 2018 when the graphics card market slumped, sending its stock down.
After rebounding from the dip, the stock soared over the following three years. It wouldn’t be shocking to see something similar happen in the long term, given that Nvidia now has greater catalysts than it had in 2018.
Why Nvidia Stock May Be Able to Rebound in the Long Term
According to IDC, PC sales might fall 12.8% this year. IDC predicts a 2.6% drop in PC and tablet sales in 2023. The market will likely recover in 2024, implying that Nvidia’s gaming sector may stay under pressure in the next year.
According to another prediction, total gaming PCs and laptop sales might reach 49.4 million units by 2025, up from 45.4 million units last year. Consequently, demand for graphics cards used in gaming PCs and laptops should rise. According to Mordor Intelligence, sales of gaming GPUs (graphics processing units) might expand at a compound annual growth rate of 14% until 2026.
With Nvidia controlling 80% of this industry, the company’s gaming division might recover in the future.
Nvidia stock (NASDAQ:NVDA) also seems well-positioned for long-term growth, with a projected five-year annual profits growth rate of 23%. As a result, investors wishing to purchase a semiconductor stock for the long term may consider taking advantage of future drops in Nvidia’s stock price, as the company’s short-term problems may give way to long-term benefits.
Featured Image- Megapixl @ Ifeelstock
Author Okoro Chinedu 
