by the Massachusetts Institute of Technology in July 2017 and currently its stock is trading 37 per cent lower than its Oct. 1, 2018 high. This makes the semiconductor provider an attractive target for research with an eye to buying a position, so that’s what I’m doing. .
The recent sharp swoon in the stock price was caused by a combination of slower global economic growth, a collapse in demand for the company’s products used for cryptocurrency mining, and the U.S. China trade dispute. These factors combined to slow sales and create a big jump in unsold semiconductors held in inventory. Inventory builds also negatively affected competitor firms like Advanced Micro Devices Inc., Micron Technology Inc., and Intel Corp.
Merrill Lynch quantitative strategist Savita Subramanian publishes an enormous report every year selecting the most applicable valuation multiple for each market sector, based on 25 years of performance history. For the broader technology sector, Ms. Subramanian believesThe current EV/FCF ratio is 29.2 time which compares favourably to the near-50 levels of early 2018 when the stock was flying high.
The most recent gross margin result for NVIDIA in January was 54.7 per cent. This is a decline from mid-2018s 64.5 per cent which is cause for concern. I also checked the price to forward earnings estimate ratio, which is now at 28.4, much more attractive than 40.5 times in January 2018.