Technology

Is Nvidia Stock Poised to Break Out With Earnings?

Chris Lange

Nvidia Corp. (NASDAQ: NVDA) has been one of the best-performing tech stocks since the COVID-19 pandemic hit, and it doesn’t look to be slowing down now. With earnings just around the corner, some analysts are hiking their price calls and the stock could continue to hit all-time highs if the results are in line with expectations.

Nvidia stock has posted gains of roughly 49% year to date, while over the past year it has more than doubled. The company has vastly outperformed the S&P 500 and is one of the index’s top five performers this year.

Earnings

Nvidia is scheduled to report its fiscal first-quarter financial results after the markets close on Thursday. Wall Street analysts are calling for $1.68 in earnings per share (EPS) and $2.98 billion in revenue for the quarter. The company had $0.88 in EPS and $2.22 billion in revenue in the same period last year.

Nvidia issued guidance for its fiscal first quarter back in February, before the coronavirus pandemic really hit. At that time, the company said that it expected to post revenue of $3 billion (plus or minus 2%). Adjusted gross margins were forecast at 64.5% to 65.9%, and adjusted operating expenses were expected to ring in at $835 million.

The company offered no earnings forecast, and the first-quarter estimate included a $100 million downward adjustment to account for potential effects of the coronavirus.

Analysts

BMO Capital analyst Ambrish Srivastava recently released an incredibly bullish report and Street-high target for Nvidia. Srivastava upgraded Nvidia stock to an Outperform rating and raised its price target to $425 from $285. This new target implies an upside of roughly 25%.

Overall BMO is bullish on Nvidia as the chip maker moves towards genomics as the “compute landscape” has shifted over the last few years.

Srivastava explained his thinking in the report:

While the CPU will always be an important part of the solution, the GPU, and specifically what Nvidia has done with its GPU along with its software architecture, positions the company uniquely to be the prime beneficiary as we look over the next five years or so. We also believe the acquisition of Mellanox makes Nvidia an even more formidable presence in the data center market.

Also, considering the current market climate, Nvidia’s data center business should be booming. BMO increased its annual data center run rate forecast to at least $20 billion in 2020, up from its previous forecast of $4.8 billion.

BMO capped its report by saying:

Our view is that the company’s execution and its latest release of its data center suite of products suggests the software and hardware moat the company has created is getting deeper and wider. This is particularly true in our view as we head into an era of comput[ing] that is opening an opportunity in acceleration for Nvidia.

A few other analysts weighed in on Nvidia ahead of results as well:

  • RBC reiterated an Outperform rating and raised its price target to $385 from $350 on May 19.
  • Susquehanna reiterated a Positive rating and raised its price target to $410 from $355 on May 19.
  • Nomura reiterated a Sell rating with a $230 price target on May 17.
  • Sanford Bernstein reiterated a Buy rating with a $360 price target on May 15.
  • Raymond James reiterated an Outperform rating and raised its price target to $330 from $300 on May 15.
  • Oppenheimer initiated coverage with a Buy rating and a $350 price target on May 15.

For the most part, analysts think Nvidia is set to fly even higher, that is if earnings come through as expected.