Nvidia stock (NASDAQ:NVDA) bears are out in force this year, as the company has lost a massive 60% of its value thus far in 2022. Recent events in the personal computer (PC) and data center industries indicate that the bears will maintain their advantage.
In the face of these challenges, Nvidia bears will argue that the stock’s (NASDAQ:NVDA) drop is far from done. Let’s take a deeper look at their possible arguments.
What the bears have to say about Nvidia Stock
Following its big decrease in 2022, Nvidia stock (NASDAQ:NVDA) trades at a juicy 39 times trailing profits and ten times revenues. The Nasdaq-100 index, by contrast, has a price-to-earnings ratio of 23 and a sales multiple of 2.8, showing that Nvidia stock (NASDAQ:NVDA) is still expensive.
The chipmaker’s growth has stalled, making it harder to justify this lofty price. The company’s second-quarter sales in fiscal 2023 (for the three months ending July 31) increased by just 3% year on year to $6.7 billion. Adjusted profits per share declined 51% year on year to $0.51 per share. Nvidia’s current-quarter sales projection of $5.9 billion indicates a 17% year-over-year fall.
Meanwhile, experts predict that Nvidia’s revenue will stay constant at $27 billion in the current fiscal year. They anticipate a 24% decline in the company’s profits. These bleak forecasts are unsurprising, given that Nvidia’s second-largest gaming industry is expected to stay under pressure. The company’s gaming revenue was down 33% last quarter, and with PC sales expected to fall roughly 13% in 2022, demand for gaming graphics cards is likely to stay weak.
As a result, the bearish thesis predicts that Nvidia stock (NASDAQ:NVDA) may fall in the near term. However, Nvidia supporters may argue that the business is well-positioned to overcome these short-term difficulties and fly in the long run.
Nvidia Stock: The bullish case would emphasize the larger picture.
While Nvidia stock(NASDAQ:NVDA) near-term prospects may not seem to be promising, bulls believe the business can make a strong comeback in the long run. As it turns out, experts estimate Nvidia’s comeback to begin in fiscal 2024. They anticipate a 13% growth in sales and a 30% increase in profitability year over year.
Furthermore, the long-term prediction looks to be favorable. Analysts predict that Nvidia’s profits will expand at a 23% annual rate over the next five years. These optimistic expectations are not unexpected given Nvidia’s two key end markets, gaming and data center. According to Mordor Intelligence, the gaming graphics card market might expand at a 14% annual rate until 2026.
It is also worth mentioning that the automotive, omniverse, and cloud gaming businesses have the potential to play a significant role in fueling Nvidia’s growth over the next decade.
What can investors do?
The Bull case suggests that Nvidia stock (NASDAQ:NVDA) might be a great long-term investment, but the business must first deal with its immediate challenges. The stock might continue to fall until there are clear indications of a reversal, so it would make sense for investors to wait for Nvidia to fall more before purchasing it in order to capitalize on the many prospects that could fuel the company’s development.
Featured Image – Megapixl © Andreistanescu
Author Okoro Chinedu 
