Investors are expecting the best from Nvidia’s earnings – what that could mean for the stock

Key learning points

  • Nvidia shares rose Monday ahead of the company’s lofty first-quarter earnings report, which will be released after markets close Wednesday.
  • Consensus estimates showed that analysts had revised expectations higher ahead of the report.
  • Bullish investors expect the chipmaker’s revenue and expectations to exceed analyst estimates by more than $1 billion.
  • Analysts suggested that investor expectations may be too high and could contribute to a big move in Nvidia’s share price after the company’s earnings release.

Shares of Nvidia (NVDA) rose in intraday trading on Monday, ahead of the chipmaker’s highly anticipated first-quarter earnings report, due after the bell on Wednesday.

Analysts raised their estimates ahead of Wednesday’s report, though some expressed concern that investor expectations for the chipmaker could be even higher, potentially leading to a big move in Nvidia’s stock price after its earnings release from the company.

Nvidia shares rose 2.4% to $947.10 around 1:40 PM ET on Monday, having nearly doubled in value since the start of the year.

Rising estimates and price targets

Ahead of Nvidia’s earnings announcement Wednesday, analysts raised their expectations for the chipmaker, according to consensus estimates compiled by Visible Alpha. Analysts said they now expect Nvidia’s revenue to reach $24.74 billion, while net income will come in at $12.91 billion, or $5.19 per share, with all three figures slightly higher than last week’s projections.

Higher expectations for Nvidia’s results have also led some analysts to raise their price targets for the stock. Barclays analysts on Monday raised their price target for the stock from $850 to $1,100. first quarter and an increase of $2 billion in the July quarter.

Stifel analysts also raised their price target from $910 to $1,085, calling the chipmaker a “top pick on the AI ​​infrastructure investment theme.”

Investors’ expectations could be even higher

Bank of America analysts reported that based on conversations with investors, “expectations appear to be well above consensus estimates as usual.”

They said bullish investors expect first-quarter revenue of $26 billion, higher than analyst estimates, and expectations for the July quarter will be close to $28 billion. By comparison, consensus estimates from Visible Alpha show that analysts expect second-quarter revenue of $26.96 billion.

Significant price movement could follow the gains

Given high investor expectations, analysts expressed concern that an earnings increase alone might not be enough to impress investors. “Even if NVDA were to potentially realize these bullish expectations, shares could still react unfavorably,” Bank of America analysts wrote.

Susquehanna analysts indicated that while they expect “another strong report” from the chipmaker, they noted that due to “heightened expectations now that the sell side has raised estimates for July/2024,” Nvidia should expect “at least a $1.5 billion profit” might need for moderate growth. response.

Options market prices suggest that traders expect the stock to move about 10% in either direction.

Significant moves before and after an earnings report have been the norm for Nvidia in recent quarters. Nvidia shares had fallen ahead of the company’s February earnings report and rose more than 9% in extended trading after results beat expectations. The earnings announcement pushed Nvidia’s market cap above $2 trillion in the following days.

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