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Nvidia’s first-quarter earnings report is set to be released this evening at 5 PM.
And analysts are expecting big things from tonight’s release. I’ll touch on this in just a second.
But first, Nvidia’s share prices started to tumble late last week. Prices went from $954 per share on Thursday morning to close Friday at $924, that’s a 3% drop.
Then shares rose 1.39% Monday ahead of the most anticipated earnings report of the season and continued to rebound up about 2% On Tuesday as well.
You see, just by watching Nvidia, we can see how stressed the market is. And as I shared a couple of weeks back, how the market responds to Nvidia’s earnings release will be a fantastic indicator of what direction the market will go.
If they post a fantastic quarter and share prices somehow drop, then we’ll know there’s a lot of fear in the market and investors will make a flight to safety.
If they post fantastic results and share prices soar then we’ll know that some bullishness has been reignited in the market and the fear has subsided.
Big Things
So what big things is the market expecting?
Wall Street consensus estimates showed that analysts had revised their expectations of Nvidia’s earnings even higher ahead of the report. That means they now believe Nvidia is going to report even better earnings than they initially thought.
Wall Street analysts have indicated they now anticipate Nvidia's revenue to come in at $24.74 billion, and net income at $12.91 billion ($5.19 per share). All three of which are up slightly from last week's projections.
However, much of Wall Street has shared that some of these investors' expectations may be too high and that they should temper their expectations to avoid a big downward move in Nvidia's stock price after the release with some Bank of America analysts reporting "expectations seem well above consensus estimates as usual."
Bank of America analysts also shared that many of these bullish investors are expecting first-quarter revenue of $26 billion, much higher than Wall Street’s revised consensus estimates of $24.74 billion.
Many of these investors are also expecting next quarter's guidance to be close to $28 billion in revenue (for the July quarter). Which is also lofty compared to consensus estimates compiled by Visible Alpha that show analysts project second-quarter revenue of $26.96 billion.
OK, so that’s a lot of data points I just threw at you… What does it mean?
Where does Wall Street actually think share prices are going?
Many analysts on Wall Street have begun to raise their price targets for the stock. With Barclays analysts bumping up their price target on Monday to $1,100 up from $850. And shared that 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 target to $1,085 up from $910. They called Nvidia a “top pick relative to the AI infrastructure investment theme.”
Well, like most earnings announcements, it means both sides of the coin are very much in play.
We saw the former stock market darlings (Tesla and Apple) both do extremely well this quarter.
At the same time, you can only price in so much expectation for a stock (even Nvidia) before you set yourself up for a disappointing response even when they do perform well on the true baseline metrics.
I’m not alone in my fear that even a beat and raise earnings quarter for Nvidia may not be enough to send shares higher.
Which is precisely what Bank of America pointed out: "Even if NVDA were to potentially deliver on these bullish expectations, the stock could still react unfavorably.”
And Analysts at Susquehanna also notched a similar sentiment, indicating that they expect "another strong report" from Nvidia. But they noted that due to "elevated expectations as the sell-side has ratcheted July 2024 estimates," and Nvidia could need "at least a $1.5 billion beat" for a muted reaction.
The stock is already up 97% this year and many retail investors have extremely high expectations of this quarter's earnings release, arguably too high.
That said, if there’s one stock that can rise to the occasion, it’s potentially NVDA.
That’s why Graham Lindman and I are going to trade it live @ 3pm ET today!
Large price swings before and after an earnings report have become a normal thing for Nvidia. For example, in February, Nvidia’s stock dropped ahead of the company's earnings report in February. After the report, shares gained more than 9% in extended trading hours and sent Nvidia's market cap above $2 trillion in the following days.
So we can see there’s a lot of potential for both some extreme upside and downside. Current pricing in the options market indicates that investors are expecting that shares could move 10% in either direction.
Let’s find out together. | | | | |
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