Nvidia Stock Forecast: NVDA rebounds in Friday premarket on Broadcom earnings
- FTC sued NVIDIA to block its merger with Arm on December 2.
- NVDA stock up 2% in premarket trading.
- Broadcom said it would buy back $10 billion in shares.
Nvidia (NVDA) stock opened higher on Friday alongside the entire semiconductor sector after competitor Broadcom (AVGO) reported solid quarterly earnings after the market closed on Thursday and announced it would complete a $10 billion buyback program by the end of 2022. The stock opened up 2.2% at $311.69.
Nvidia (NVDA) Stock News: Broadcom makes sector smile
During this moment when supply constraints have boosted the price of most semiconductor chips, the entire sector is earning record profits. It comes as little surprise then that Broadcom would be one to greatly benefit from the sector's propitious climate.
Broadcom reported net income of $1.91 billion on revenue of $7.41 billion. Net income was up around 50% YoY. With more than $12 billion in cash on its balance sheet, management thought it best to buy back $10 billion worth of shares by the end of next year, which will of course boost future earnings per share.
The Federal Trade Commission (FTC) announced a lawsuit to block Nvidia's Arm deal late on December 2. NVIDIA offered $40 billion to buy Arm from Japan's SoftBank back in September 2020. The deal has been stalled for more than a year as UK regulators and politicians debate the merits of the deal.
The FTC named three specific chip sectors that they propose would be particularly poorly affected by a merger. High-level advanced driver assistance systems for passenger cars, DPU SmartNICs for data centers and Arm-based CPUs for cloud providers would all be prone to anti-competitive forces in the case of a merger.
Nvidia's attempt to settle the lawsuit with the FTC was denied. The administrative trial is scheduled to begin on Aug. 9, 2022. In September 2022, if the deal fails to proceed, SoftBank gets to pocket a $1.25 billion downpayment fee.
NVDA key statistics
| Market Cap | $762 billion |
| Price/Earnings | 94 |
| Price/Sales | 32 |
| Price/Book | 35 |
| Enterprise Value | $754 billion |
| Operating Margin | 35% |
| Profit Margin |
34% |
| 52-week high | $346.47 |
| 52-week low | $115.67 |
| Short Interest | 1% |
| Average Wall Street Rating and Price Target | Buy, $339.25 |
Nvidia (NVDA) Stock Forecast: Moving averages forecast downtrend
The Moving Average Convergence Divergence (MACD) indicator crossed over on November 26, and now two weeks later the 9-day moving average has confirmed the downtrend by crossing below the 21-day average. This is despite recovering from the December 6 crash.
With the MACD diverging in its differential and the Relative Strength Index gradually drifting lower, it sure seems like NVDA stock is bracing for more price action to the downside. The short-term moving average crossover is just the nail in the coffin. It does not look like Christmas will bring about any type of rally for NVDA stock.
With shares up 145% from a year ago and a price/earnings ratio in the 90s, a sell-off could be healthy so that the stock remains a go-to for stock pickers in 2022. Support seems possible near the 50-day moving average at $270.
NVDA 1-day chart
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Author
Clay Webster
FXStreet
Clay Webster grew up in the US outside Buffalo, New York and Lancaster, Pennsylvania. He began investing after college following the 2008 financial crisis.
