Nvidia earnings may push share price to new record high!

Nvidia is set to release its latest quarterly financial results after US markets close today (Tuesday, 21 Nov.)

Markets want to know how much more the AI-mania can keep fuelling this US chipmaker’s earnings.

In case you missed it, this frenzy surrounding artificial intelligence, since OpenAI launched ChatGPT late last year, has already translated into eye-watering gains for Nvidia’s share prices:

• This stock has risen by 245% year-to-date
   
• Nvidia is the best-performing stock on the S&P 500 and the Nasdaq 100 – different benchmark indices for the US stock market – so far in 2023.
   
• Nvidia is the world’s most valuable chipmaker, with a market cap of US$1.245 trillion.
  
  This places Nvidia in an elite Trillion Dollar club (other US-listed companies that have a market cap of over US$ 1 trillion), joining the likes of Apple, Microsoft, and Amazon.

Here are some key considerations for markets going into today’s earnings announcement:

1. AI-fuelled earnings: Nvidia is already seen as a notable exception in that it has already demonstrated the ability to churn actual profits out of the ongoing AI-mania.
   
   But how long will the earnings boost last before it plateaus?

2. China challenges: Nvidia’s exports to China – the world’s largest market for semiconducters – have been met with some opposition from the US government, as President Biden tightened regulations and limited exports of cutting-edge technology.
   
   Such measures have in turn impacted Nvidia’s A800 and H800 chips, while the company claims the US administrations restrictions are also hampering product development, customer support, and even supplies to other countries.
   
   How is Nvidia coping with such hurdles over the short- and longer-term?

Nvidia’s Q3 FY24 (August-October 2023) earnings: Key figures

Here are the analysts’ forecasts for some of Nvidia’s key metrics due later today:

• Revenue: US$ 16.09 billion
   
• Research and development expenses: US$ 2.21 billion
   
• Operating income - adjusted: US$ 9.67 billion
   
• Earnings per share (EPS) – adjusted: US$ 3.36

While noting that the above numbers are for the past, they still hold plenty of potential to move the stock, as much as the forward-looking statements surrounding the key points cited at the top of this report.

Note that for the 2024 fiscal year, analysts are forecasting Nvidia’s revenue to reach US$54.88 billion.

What do Wall Street analysts currently think of Nvidia’s stocks?

As things stand, Nvidia has:

• 60 “buy” calls
   
• 3 “holds”
   
• 0 “sells”

The median projection among these analysts also predict that this stock could rise by 28.6% to reach $648.50 over the next 12 months.

Nvidia’s announcement later today would help determine just how much of those potential profits will become a reality for investors, and how soon.

How might Nvidia’s stocks react after today’s earnings?

Markets currently forecast that this stock will move by 7%, either upwards or downwards, once US markets reopen on Wednesday, November 22nd (the day after Nvidia releases its earnings).

• This stock could move higher if Nvidia can still sound optimistic about its earnings prospects, citing resilient demand for its GPUs despite the ongoing challenges for its exports to China.
  
  Of course, better-than-expected results from its most recent quarter should also spur this stock higher.

• This stock could be forced to pare recent gains if Nvidia unveils lower-than-expected figures for Q3 FY24, or points to peaking demand for its GPUs, or stronger headwinds surrounding US government restrictions.

Technical pullback soon?

Note that Nvidia’s stock registered a fresh record high at the onset of this week.

It closed yesterday (Monday, 20 Nov.) above the psychologically-important $500 level for the first time in its history!

Markets clearly are running ahead what’s expected to be yet another blowout quarter.

That also means that the bar has been set high for today’s announcement, suggesting that the faintest disappointment may trigger a large move downwards.

At the time of writing, Nvidia is seeing muted price action in Tuesday's US open.

Eventually, this stock could attempt to clear the froth after its 23.6% surge so far this month.

After all, its 14-day relative strength index (RSI) is already flirting with the 70 threshold which marks “overbought” conditions.

Potential post-earnings scenarios:

• A 7% move to the upside on Wednesday (depending first on whether this stock ends today above or below the $500 line) could see Nvidia’s stocks trading around $535 when US markets reopen.
  
   
• To the downside, a 7% drop could see this stock trading around $465 on Wednesday.
  
  This price region also holds the 61.8 Fibonacci retracement level from its month-to-date surge.
  
  A truly disappointing announcement out of Nvidia today could see Nvidia falter back into the $400 - $480 range it adhered to between June through October.

Yet, as long as the AI tailwinds remain intact, such a pullback could present buying opportunities for longer-term investors.