Investors Expect the Best From Nvidia Earnings—What That Could Mean for the Stock

Investors Expect the Best From Nvidia Earnings—What That Could Mean for the Stock

Key Takeaways

  • Nvidia shares rose Monday ahead of the company’s high-stakes first-quarter earnings report, which will come after markets close on Wednesday.
  • Consensus estimates showed analysts revised expectations higher ahead of the report.
  • Bullish investors are expecting the chipmaker’s revenue and guidance to beat analysts’ estimates by more than $1 billion.
  • Analysts suggested investors’ expectations may be too high and could contribute to a big move in Nvidia’s stock price after the company’s earnings announcement.

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

Analysts lifted their estimates ahead of Wednesday’s report, though some raised concerns that investors’ expectations of the chipmaker could be even higher, potentially leading to a big move in Nvidia’s stock price after the company’s earnings announcement.

Nvidia shares were up 2.4% to $947.10 around 1:40 p.m. ET Monday, and have nearly doubled in value since the start of the year.

Rising Estimates and Price Targets

Ahead of Nvidia’s earnings announcement Wednesday, analysts lifted their expectations of the chipmaker, according to consensus estimates compiled by Visible Alpha. Analysts indicated they now anticipate Nvidia’s revenue to come in at $24.74 billion, while net income is seen at $12.91 billion or $5.19 per share, with all three figures up slightly from last week’s projections.

Higher expectations for Nvidia’s results have led some analysts to raise their price targets for the stock as well, with Barclays analysts on Monday bumping their price target for the stock to $1,100 from $850, saying their checks suggest an upside of more than $1 billion for the first quarter and a $2 billion upside in the July quarter.

Stifel analysts also increased their price objective to $1,085 from $910, calling the chipmaker a “top pick relative to the AI infrastructure investment theme.”

Investors’ Expectations Could Be Even Higher

Bank of America analysts reported that based on talks with investors, “expectations seem well-above consensus estimates as usual.”

They said bullish investors expect first-quarter revenue of $26 billion, ahead of analysts’ estimates, and for guidance to be close to $28 billion for the July quarter. In comparison, consensus estimates compiled by Visible Alpha show analysts project second-quarter revenue of $26.96 billion.

Significant Stock Move Could Follow Earnings

Given investors’ high expectations, analysts raised concerns that an earnings beat alone might not be enough to impress investors. “Even if NVDA were to potentially deliver on these bullish expectations, the stock could still react unfavorably,” Bank of America analysts wrote.

Susquehanna analysts indicated that while they expect “another strong report” from the chipmaker, they noted due to “elevated expectations as the sell-side has ratcheted July/2024 estimates,” Nvidia could need “at least a $1.5B beat” for a muted reaction.

Pricing in the options market suggests traders are expecting shares could move around 10% in either direction.

Significant movement before and after an earnings report has been the norm for Nvidia in recent quarters. Nvidia shares had dropped ahead of the company’s earnings report in February, and gained more than 9% in extended trading after results beat estimates. The earnings announcement sent Nvidia’s market capitalization above $2 trillion in the following days.

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