This Beaten-Down Stock Remains a Solid Buy

Does the recent selloff in Nvidia (NASDAQ:NVDA) stock mean the party’s over? Not so fast! Yes, its shares fell as much as 20% off their highs this month. But, with the stock stabilizing, the pullback may be over. And, despite this recent volatility, little has changed with the the bull case for this still “best in class” stock.

How so? The factors that helped this stock not only rebound after March’s coronavirus crash, but head even higher, remain in play. Yet, the “stay-at-home economy” tailwinds benefiting Nvidia aren’t the only thing working in its favor.

What else will help move the needle, in both the near and long-term? Firstly, Nvidia’s exposure to the many of the secular growth trends set to play out this decade.

I’m talking about the company’s upside potential from the A.I. and AV (self-driving vehicle) megatrends. As both these budding industries gain critical mass, growth isn’t slowing down anytime soon.

Secondly, the company’s smart mergers and acquisitions (M&A) strategy also sets it apart. I detailed this in my last article on Nvidia.

Far from buying for the sake of buying, the company is doing deals that offer synergy with its existing business — and are immediately accretive to earnings.

Organic growth and M&A deals that produce shareholder value? Simply put, you’re getting the best of both worlds. With this in mind, don’t let this month’s selloff scare you off this opportunity. As shares hold steady between $475 per share and $500 per share, now’s the time to pounce.

NVDA Stock, the Selloff and the Inevitable Bounce Back

The recent selloff in Nvidia, and in tech stocks in general, may have you concerned that this winning sector is beginning to top out. Granted, the “winners keep winning” mantra of this year’s stock market doesn’t make this sector bulletproof from pullbacks. But, while we are seeing investors cashing out, and taking profit, it’s still premature to say the music has stopped.

That is to say, what’s going on as of late in the markets does little to impact the bull case for the leading tech growth stories. Especially Nvidia.

Why? Chalk it up to three reasons. First, the growth story for NVDA stock remains in motion. Even in the next fiscal year (ending January 2022), which likely lack this year’s novel coronavirus pandemic windfall, growth is slated to remain well in the double-digits.

But, that’s not all! The aforementioned secular growth trends, coupled with Nvidia’s smart M&A strategy, ensures ample runway for years to come. In short, the bull case for this stock stems beyond just today’s “stay-at-home economy” tailwinds.

It’s seemingly impossible to derail a growth story like that of Nvidia’s.

This Decade’s Megatrends Will Fuel Further Upside in Nvidia

As I talked about earlier this month, the pandemic is accelerating technological change. In the news, we hear a lot about the “new normal.” That is to say, the long-term changes resulting from this outbreak. But, while in the headlines that phrase sounds dire, for NVDA stock this means further fuel for the fire.

In other words, a further acceleration in demand from end users for Nvidia’s CPU and GPU chips. And not just from existing core markets, like data centers and video games. But also, from the emerging AI and AV industries.

To top it all off, the company’s shrewd M&A strategy will help maximize the potential long-term gains in NVDA stock over the next few years. What do I mean?

Take the recent deal for Arm Holdings. Not only will the transaction be immediately accretive to earnings. The technological assets acquired from the deal could turn Nvidia into the “world’s most important chip maker.”

With these long-term catalysts on top of the current tailwinds, there’s no question why this stock remains one of the best ones out there to own.

Seize the Opportunity

Many may see the recent performance of Nvidia stock, and think shares are topping out. The overall selloff in big tech names could have some doubting that the “winners will keep on winning.” But, as I detailed above, this company’s underlying fundamentals haven’t changed one iota.

Even once the pandemic is in the rearview mirror, end-user demand for the company’s chips will continue to skyrocket. Whether from existing end-users (data centers, video games), or the ones gaining critical mass this decade (AI, AV)

So, what’s the call? As this stock remains “best in class,” seize the opportunity (September selloff), and buy NVDA stock.

— Matt McCall

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Source: Investor Place