Nvidia Stock Has Been Flat, But NVDA Price Targets are Higher - Shorting Puts Works
Nvidia Stock Has Been Flat, But NVDA Price Targets are Higher - Shorting Puts Works.
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Analysts have been raising their revenue and price targets for Nvidia Inc. (NVDA) stock. However, NVDA has been flat since April 29, almost two and a half months ago. That makes shorting out-of-the-money (OTM) NVDA put options very worthwhile. This article will show why.
NVDA closed Friday, July 10, at $210.96 , up from a recent low of $192.53 on June 26. But on April 29, it was at $209.25, so it's up less than 1% in the past 2+ months. That means it's trading water.
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Meanwhile, analysts have been raising their revenue forecasts for next year. That implies its free cash flow (FCF) generation will be higher.
As a result, using a conservative valuation, NVDA's price targets from the analyst community are now much higher. That is reflected in higher analyst price targets.
It also gives investors a great opportunity. They can sell out-of-the-money (OTM) puts repeatedly for one-month expiry periods. That way, they can keep earning a 2% monthly yield and also set a lower potential buy-in point.
I discussed this in a June 12 Barchart article (" Analysts Keep Hiking Nvidia's Forecast Revenue and Price Targets - Is NVDA Too Cheap?" ).
For example, I showed that NVDA stock could be worth $309 per share based on an FCF estimate of $294 billion for 2027. I used a 53.3% FCF margin on the average analysts' $551.66 billion 2027 revenue forecast. In fact, the highest analyst revenue estimate is over $710 billion.
Today, analysts are now forecasting higher revenue at $555.51 billion for 2027, so the FCF estimate is $296 billion .
And using a 25.5x multiple (equal to a 3.92% FCF yield), that sets Nvidia's market value at $7,548 billion (i.e., $7.548 trillion). That is 47.7% higher than its present market cap of $5.11 trillion, according to Yahoo! Finance.
That's slightly higher than my prior $309 price target. Moreover, analysts also have similar price targets (PTs). For example, Yahoo! Finance reports that 61 analysts have an average PT of $301.62.
That's 42.9% over Friday's close and higher than the prior average of $298.42, as seen in my last Barchart article on Nvidia a month ago.
Similarly, Barchart's mean PT is $302.55, and AnaChart's PT is $298.20. So, on average, analyst survey price targets are $300.79 , or +42.6% over last week's closing price.
The bottom line is that NVDA stock is now worth more than a month ago, but NVDA has been flat.
That makes it ideal for short-put players. They can reap the benefit of earning high put option yields and also setting a lower potential buy-in point.
For example, last month in a June 12 Barchart article, I suggested shorting the July 10 $190 NVDA put for a $3.50 premium.
