Back from the dead? That’s what it feels like with Nvidia (NASDAQ:NVDA), as shares have erupted over the past few months and quarters.It’s no secret that chip and semiconductor stocks are back in favor, but the resurgence in Nvidia stock is even more impressive given how hard it was hit.Source: Hairem / Shutterstock.com Coming into the fourth quarter of 2018, Nvidia stock was riding high.Investors had enjoyed a multi-year run in the stock that had returned roughly ten-fold on their early investment.The stock peaked at just over $290 per share, but then began to slip.The top came on Oct.2.Because crypto-mining had inflated the company’s top- and bottom-lines and those buyers suddenly vanished, it sent Nvidia into a tumultuous fall.InvestorPlace – Stock Market News, Stock Advice & Trading Tips * The Top 5 Dow Jones Stocks to Buy for 2020 Nvidia stock was going to get hit hard regardless during this time, as the S&P 500 and Nasdaq endured peak-to-trough declines of ~20% in less than three months.But Nvidia management had perhaps the worst timing possible to announce this negative crypto-related news.Shares ultimately fell more than 50% in just a few months.Is that all over now? Let’s look at three reasons Nvidia may be back.
GrowthPerhaps Nvidia’s largest catalyst for a robust 2020 is a return to growth.The company has reported the first three quarters of fiscal 2020 already, with the last report likely due up in about a month.If the results are in-line, the company will report a ~8% decline in full-year sales and a ~16% decline in annual earnings.These figures are bad — especially for a stock that’s rallied 48% over the past six months — and cap off a very disappointing 2019.But investors are unlikely to focus on the Q4 results, and instead focus on what’s ahead.That’s as consensus expectations call for a 19.1% rebound in growth and for earnings to grow 30.2% in fiscal 2021.It’s obviously impossible to say whether Nvidia will beat or fall short of these estimates, but if management can deliver, it will represent record figures for both metics.Nvidia will officially be “back” if that’s the case.As for looking beyond calendar 2020, there’s no telling what roadblocks may lie in the way.All I can say is that, Nvidia is positioned in various secular growth trends and its products are literally the backbone to many of the services, automations and technologies that companies are and will continue to rely on in the future.Mellanox DealIn March, Nvidia announced it will acquire Mellanox for $125 per share in a $6.9 billion deal.
In December, Nvidia received approval from the EU.China was the obvious worry when it came to approval, given that its silent treatment on Qualcomm (NASDAQ:QCOM) and NXP Semi (NASDAQ:NXPI) caused that deal to fall through.With the phase one trade deal now signed though, the hope by many is that Chinese regulators will be willing to play ball and sign off on the deal.Nvidia has recently said it expects the deal to close in early 2020.Why does this deal matter? Nvidia has said it expects the deal to be accretive to gross margins, earnings and free cash flow immediately after closing.That would help give a nice boost to an already improving situation.
It will also be one more catalyst to take Nvidia stock higher.Nvidia Stock Chart Click to Enlarge Source: Chart courtesy of StockCharts.comIs Nvidia stock stretched? Well, let’s just say that it’s not exactly flying under the radar.The stock is up about $100 per share, or almost 70% from the August lows.Given that run, I wouldn’t be surprised to see the stock hit “pause” at some point this year.That said, it’s hard to bet against such a strong trend.
After plunging below $190 in 2018, the stock tried several times to breakout over this level in 2019.It finally did so in October, while also reclaiming the 100-week moving average.The latter became support as Nvidia stock continued to grind higher.For now, the 10-week moving average continues to act as support, while the stock flirts with a breakout over $250.Ideally, we would get a pullback to uptrend support (blue line) and the 10-week moving average first.That way the stock can unwind some of its overbought condition and investors will get a chance to buy the dip.There are plenty of analysts getting bullish on the stock as well, with the latest calls ranging between $275 and $300 (shown via a blue box on the chart).In the past week, Nvidia stock has received a $300 target from four different analysts.So it’s not as if just one or two bullish calls are being taken into consideration here.That doesn’t mean Nvidia stock will get to $300 or that it will do so in the next month or two, but it’s something to consider.As it stands right now, the technicals are another catalyst to the stock.Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
As of this writing, Bret Kenwell is long NVDA.More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * The Top 5 Dow Jones Stocks to Buy for 2020 * 7 Fintech ETFs to Buy Now for Fabulous Financial Exposure * 3 Tech Stocks to Play Ahead of Earnings The post 3 Reasons Nvidia Stock Could Be Set for a Monster 2020 appeared first on InvestorPlace..