- Nvidia's eagerly awaited earnings report is due after market close today.
- High consensus expectations leave no room for error for the chipmaker.
- The results could influence the broader market and set the tone for investor sentiment in the coming weeks.
- For less than $8 a month, InvestingPro's Fair Value tool helps you find which stocks to hold and which to dump at the click of a button.
Investors around the world are waiting for Nvidia's (NASDAQ:NVDA) earnings with bated breath, which is set to be released after the closing bell today.
As the driving force behind the recent AI rally, the chipmaker's results would have a ripple effect on the broader technology sector.
The last few months have been a roller-coaster ride for the company, with the stock losing about 26% between the high on June 20 and the low on August 5. However, the stock has rebounded sharply ever since, gaining just under 20% in the process.
Recently, the bullish rebound's momentum has stalled as investors hold back, waiting for more clarity on Nvidia's performance before making their next moves.
Below, we'll take a look at what investors can expect from the keenly anticipated earnings results.
The Bar Is Set High Once Again
As usual, the bar is set very high for Nvidia's earnings. Analysts expect Nvidia to report an EPS of $0.64, up 134% year-on-year, on sales of $28.727 billion, a 109% increase year-on-year.
EPS forecasts have also risen significantly over the past 90 days, putting the chipmaker under pressure to deliver results that could drive the stock higher.
On the flip side, any indication of weakening demand for AI or cost-cutting from major cloud customers could lead to a significant drop in revenue.
Nvidia's guidance for the coming quarters will be crucial, with analysts anticipating growth to slow down, forecasting around 75% growth to $31.7 billion for the current quarter.
Source : InvestingPro
Nvidia's recent rebound has been fueled by continued strong spending on its data centers and infrastructure, backed by feedback from major customers.
Last month, the CEOs of Google (NASDAQ:GOOGL) and Meta (NASDAQ:META) emphasized that underinvesting in AI poses a greater risk than overspending.
Blackwell Chip Delivery Timeline Under Scrutiny
Investors are also keenly watching for updates on Nvidia's Blackwell chip timetable. Reports earlier this month indicated that production issues might delay the release of this next-generation chip until the first quarter of 2025.
Despite Blackwell's potential delay, Nvidia's current chips remain top choices for deploying AI applications like ChatGPT.
However, competition from Advanced Micro Devices (NASDAQ:AMD), Google, and various startups is pressuring Nvidia to accelerate the rollout of its next-generation technology.
Many analysts have downplayed concerns about the Blackwell chip, suggesting that any revenue delays will likely push forecasts to a later quarter, which could lead to bullish revisions.
Stock Overvalued Ahead of Earnings
As Nvidia's earnings report approaches, evaluating the stock's valuation is crucial. Analysts have set an average target price of $143.10, suggesting a potential upside of 11.5%.
However, InvestingPro's Fair Value estimate, which integrates multiple valuation models, stands at $109.49, indicating a downside risk of nearly 15%.
Source : InvestingPro
This discrepancy highlights concerns about the stock's current valuation ahead of the results.
Conclusion
For Nvidia to sustain and build on the recent rally, it will need to either exceed earnings expectations or substantially raise its forecasts.
More importantly, the results could have a broader impact, influencing investor sentiment and potentially shaping the direction of global stock markets in the weeks to come.
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