Back to top

Image: Shutterstock

Zacks Investment Ideas feature highlights: Nvidia and Roku

Read MoreHide Full Article

For Immediate Release

Chicago, IL – January 6, 2020 – Today, Zacks Investment Ideas feature highlights Features: Nvidia (NVDA - Free Report) and Roku (ROKU - Free Report) .

Stocks to Keep an Eye On If the Market Corrects

The first two days of 2020 trading have been marked with uncertainty. The news of China’s central bank cutting the reserve ratio and allowing more money to circulate in the economy pushed all major US indices (except the Russel 2000) to all-time highs. Today, the second day of 2020 trading and the markets are down nearly 1%, wiping almost all of yesterday’s gains off the table. Turbulence on the Iranian front is the primary catalyst for today’s sell-off.

The markets seem to be unsure of which direction to go. In December, the markets floated up on low volumes, ending the year at all-time highs. This gradually upward move doesn’t appear to have much support.

2019 is expected to finish up the year with negative earnings growth year-over-year, which has not been reflected in the stock market’s performance, with S&P 500 rallying 29% last year (its best year since 2013). Right now, the S&P 500 is trading at around 20x forward P/E, which is its most expensive level since the early 2000s. The stock market has been pricing in 2020 and 2021 growth that has not come to fruition. I believe that it may have overstepped its bounds.

Is the market due for a correction? Options are pointing to yes.

Market bears have been buying up March expiring puts for the markets most traded ETF, the SPDR S&P 500 ETF (SPY). As it stands, there are currently around 50% more puts expiring in March than calls. This means that most options traders are betting the stock market will fall in the next 2.5 months.

Stocks to Keep an Eye On

The correction I am anticipating will create a buying opportunity for some of my favorite stocks. Companies with savvy management teams, a sustainable product offering that can ride the trends of the future.

NVDA

Nvidia is my favorite chip-making company that I anticipate will take over the space in this next wave of tech. Nvidia is known for its GPU’s which have been primarily used for rendering images, but its speed and efficiency are making these semiconductors particularly useful in datacenters. Nvidia’s datacenter chips are being used in for deep learnings, and as its technology continues to progress, with this firm controlling almost 100% of the datacenter GPU market. I expect that NVDA chips will be a part of the first true AI.

Nvidia is also leveraging 5G with its anticipated cloud gaming platform.

Like cloud computing is the future of business data and analytics, cloud gaming is the future of gaming. Nvidia is making a big bet in this field with its cloud platform, GeForce NOW. This platform allows gamers to use their Macs or PCs for gaming anywhere with the high-speed, low-latency technology of Nvidia’s GPUs without needing Nvidia’s hardware locally.

Nvidia is teaming up with telecommunication providers “to expand and improve the cloud gaming experience globally.” Getting in front of the 5G wave to be prepared with a turnkey solution once 5G is widely available.

These shares have seen a roughly 75% run-up over the last 52-weeks. I presume that NVDA would see a sizable fall in the case of a market correction, considering it is sporting a beta north of 2. I like this stock at any price below $200.

ROKU

The streaming devices leader, Roku, is another stock that I would love to get a hold of at the right price. These shares are trading at a rich double-digit forward P/S, and I would like to get into this stock if this valuation would drop into the single digits. ROKU is a highly volatile stock and would undoubtedly take a hit with the broader market. I would look to buy this stock as it approaches $100 or hits its 200-day moving average, which currently sits at around $110.

Roku is on the right side of the streaming war as more competition in the space only adds to its product offering. Roku has become almost synonymous with cord-cutting. According to Roku’s most recent shareholders’ letter, “roughly 50% of U.S. cord cutters are Roku customers, and around 56 million households in total will have canceled cable or satellite TV subscriptions by 2023.” Its devices range from a $30 4K plug-ins to very affordable TV options, partnering with top brands.

Take Away

The market is expensive right now, and traders are starting to see it. March puts are looking increasingly attractive as options traders pile on. This market has floated up in December and all it needs is a little prick to deflate back to more practical levels.

As an investor, I would be hesitant to put any substantial long position on until a slight correction is seen. I would like to see the S&P 500 forward P/E multiple drop down to the mid-to-upper teens before I feel safe about putting more into the market, although positive trade news could extend this rally.

Looking for Stocks with Skyrocketing Upside?


Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Follow us on Twitter:  http://twitter.com/ZacksResearch

Join us on Facebook:  http://www.facebook.com/ZacksInvestmentResearch

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

http://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


NVIDIA Corporation (NVDA) - free report >>

Roku, Inc. (ROKU) - free report >>

Published in