• Like other semiconductor stocks, Nvidia (NVDA) has been hit hard in 2022
• NVDA stock still trades for 16 times annual revenue and 44 times earnings
• When the current panic ends, investors should pounce

Nvidia (NASDAQ:NVDA) stock is beginning to look like a bargain again. At its May 12 closing price of just below $162 a share, Nvidia is down 45% so far this year. But it’s still not cheap. Investors buying now would be paying 16 times revenue and 44 times earnings to own it.

NVDA stock likely has further to fall. But if you can grab it near its bottom, you’ll make money.

That’s because Nvidia makes money. During the 2022 fiscal year, which ended in January, Nvidia earned $26.9 billion in revenue and $11.3 billion in net income, for a net profit margin of over 40%. The company had more than $21 billion in cash on its books in January and doesn’t have the capital expense of a foundry.

So why is NVDA stock falling?

No One Buys Yesterday

The first quarter of 2023, which just ended, should be the best in Nvidia history when it’s reported on May 25. Analysts expect earnings of $1.29 per share on revenue of $8.1 billion, up 42% and 43%, respectively, over the same period last year. The whisper estimate puts earnings at $1.35 a share.

The trouble is investors don’t buy your yesterdays. They want your tomorrows. And the next few quarters could be rough. Taking Russia out of the market, and looking at China’s lockdowns, analysts are predicting a global recession.

Chip prices are also very sensitive to demand. The price of Nvidia’s graphics boards dropped about 12% in April and should go down further in May. The crypto crash means there’s no demand from miners, which has created bargains for gamers. Cloud data centers, which are the biggest buyers of chips, are certain to take advantage, resulting in lower margins.

As a result of all this, some analysts have already downgraded NVDA stock.

Nvidia’s biggest problem, however, is supply. Intel (NASDAQ:INTC), which is seeking to expand its foundry capacity (and could supply Nvidia once that’s done) sees the current chip shortage lasting another two years. Nvidia’s current supplier, Taiwan Semiconductor Manufacturing (NYSE:TSM), keeps hiking prices, which will crimp margins.

Is NVDA Stock Cheap Yet?

Nvidia bulls are eyeing the stock’s chart and wondering where the bottom is. Over the long run, they insist shares are a great bargain, even here, thanks in part to Nvidia’s $1 trillion addressable market. Nvidia regularly appears in articles touting stocks that are well off their highs and, thus, bargains.

One analyst made headlines back in July when he gave NVDA stock a $1,000 price target. Currently, the average price target is just above $329, which would be a double from here. 

So, while Nvidia’s sales and earnings are rising, NVDA stock is falling as the entire market experiences a period of multiple compression. The price-to-earnings ratio for the S&P 500 is now below 20. Nvidia’s P/E ratio is more than twice that.

That’s why some smart analysts, like InvestorPlace’s Tyler Craig, are telling investors to keep their powder dry a while longer. Semiconductor stocks often go through intense boom-and-bust periods. This is a bust. There will be a boom. You just have to wait for it.

The Bottom Line on NVDA Stock

The current market has proven once again why the cash in your account is a great asset. If you have some, there are great buying opportunities coming. Nvidia is one of them.

There will come a time, not long from now, when people are talking about smart cars, artificial intelligence and virtual reality again. Those are great opportunities for Nvidia’s graphics chips, on both the client and server side. But that time is not now.

I’m reminded of my favorite investment aphorism: Buy what’s real, buy what’s profitable, buy it when it’s cheap and make your money over time. Nvidia is real, it’s profitable, and it’s getting cheaper every day.

On the date of publication, Dana Blankenhorn held long positions in NVDA, INTC and TSM. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.