This Struggling Semiconductor Stock Remains Overvalued

Nvidia Corporation (NASDAQ:NVDA) is down 1.9% to trade at $186.85 at last check, as the semiconductor stock paces for its fifth daily loss in six sessions. The security has struggled on the charts since the $290 level rejected its late March rally, and earlier this month slipped below its 10-day moving average. Year-to-date, NVDA has already shed 37.3%.

Despite the negative price action, analysts remain optimistic, leaving NVDA exposed to potential price-target cuts and/or downgrades. Of the 22 firms in coverage, 18 still carry a "strong buy" rating, while the 12-month consensus target price of $329 is a 78.3% premium to current levels.

While long calls have been outpacing long puts on an overall basis, the latter have been picked up at a much quicker-than-usual pace lately. Over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), NVDA's 50-day put/call volume ratio of 0.66 stands higher than 98% of readings from the last 12 months.

Now looks like a solid opportunity to bet on the stock's next move with options. Nvidia stock's Schaeffer's Volatility Scorecard (SVS) ranks at 97 out of 100, meaning the security has exceeded option traders' volatility expectations during the past year.

The semiconductor company reported a 61% increase in revenues, and a 125% rise in net income for 2022. Nvidia is also estimated to grow revenues by 29.2% and earnings by 27% for 2023, and increase revenues by 16.9% and earnings by 19.7% for 2024. In addition, NVDA offers a dividend yield of 0.09%, with a forward dividend of $0.16.

Still, the consistency with NVDA's growth has come in recent years. Nvidia saw a 7% decline in revenues and a 32% drop in net income as recently as 2020. Plus, the chip concern doesn’t offer the best risk-reward potential at its current valuation. Nvidia stock trades at a forward price-earnings ratio of 34.97 and a price-sales ratio of 18.38, making NVDA significantly overvalued.