Nvidia earnings preview: Where next for NVDA stock?

When will Nvidia report earnings?

Nvidia is scheduled to release earnings after the markets close on Wednesday May 25.

What are analysts expecting for NVDA earnings?

Consensus analyst expectations are for the company to report $1.20 in EPS on $8.1B in revenue.

Nvidia earnings preview

If you tried to invent a business to capitalize on exciting secular technology trends like gaming, artificial intelligence, data centers, autonomous car development, cryptoasset mining, and 5G communication technology, you would create Nvidia. Not surprisingly, the chipmaker has seen its sales grow 6X in the last nine years, from $4.3B in 2013 to nearly $22B in 2022.

Expectations remain elevated for this quarter, with traders expecting both revenue and earnings to rise by more than 40% year-over-year, but the proverbial “elephant in the room” will be the global semiconductor shortage. Last month, Nvidia noted that its graphics processing units (GPUs) are ‘restocked and reloaded’, hinting that the worst of the chip shortage may be behind the company. While that would certainly bode well for sales volumes moving forward, it could cut into average selling prices (ASP) and may hurt the company’s impressive profit margins. Traders will be on the lookout for any signals that the supply-demand balance for chips is shifting in this quarter’s earnings report.

Meanwhile, on the valuation front, NVDA continues to command a “best in breed” premium over its smaller rivals. Looking at forward P/E ratios, NVDA still trades at a 30 multiple, dwarfing rivals like AMD (forward P/E of 22), Texas Instruments (19), Intel (12), Qualcomm (10) and Micron Technology (6). Comparing to itself, NVDA is roughly at its average historical valuation, suggesting that it may be a good time for long-term investors to pick up shares of a great, cutting-edge company at a reasonable valuation if earnings and guidance are able to meet/exceed expectations.

Where next for NVDA stock?

As the chart below shows, NVDA’s stock has had a rough six months, with the tech giant losing roughly 50% of its value from its November 22nd intraday peak near $350. More recently, the stock has been falling within a descending channel since the start of April, though bulls are trying to protect the 78.6% Fibonacci retracement of the 2019-2021 rally near $165 as we go to press.

If earnings come out better than anticipated, the stock is likely to break out of its bearish channel and move back toward its monthly high near $200. Meanwhile, a disappointing earnings report could lead to a break of support in the $165 area and open the door for more downside toward $150 or even the May 2021 lows in the $165 zone if risk appetite continues to ebb.

Source: TradingView, StoneX