Market capitalization of major semiconductor companies Nvidia (NASDAQ:NVDA) It overtook Amazon on Wednesday and is closing in on Alphabet (Apple and Microsoft are already looking nervously in their rearview mirrors). So will Nvidia move into third place when it releases its earnings next week on February 21st?
Susquehanna’s Christopher Rolland, a 5-star analyst who often swings the Magic 8 Ball and ranks among the top 1% of stock pros on the Street, confidently declares, “The signs point to yes.” .
Of course, that’s not what it says. Precisely, what Rowland actually said was that investors have “high expectations” for NVIDIA stock, but the company is trading at high levels and will likely report “a strong report” next week. ” will be announced.
And it better be right.
The current P/E ratio is over 95 times, and high expectations are built into NVIDIA’s stock price. In Rowland’s view, it’s not enough to meet analysts’ fourth-quarter (fiscal year 2024) earnings per share targets of $4.56 on revenue of $20.4 billion. Nvidia needs to beat expectations by at least $1.5 billion in revenue and deliver a clear profit to justify its high stock price.
So, could Nvidia do it?
perhaps. “Helped by improved hyperscale capex guidance and recent comments from Meta and Tesla suggesting they are actively purchasing GPUs from Nvidia,” Roland said Nvidia, which accounts for 80% of Nvidia’s business, We expect data center revenue to continue to grow strongly in the fourth quarter and beyond. Future demand looks good and the supply situation is improving as well, with NVIDIA likely to ramp up production every quarter through the end of this year.
So, at least for the time being, it looks like Nvidia can capitalize on the hot demand for its products by selling all the chips it can consume on the market, while increasing the price of what it sells. This bodes well for gross margins, but probably not as much as investors would expect. Nvidia already earns a gross profit margin of 74%, but it’s hard to imagine it getting much higher than 75%. And when it comes down to it, the scale only goes up to “100%” (even though there are people who can earn gross profit margins above 100%). These days, it’s probably Nvidia).
Additionally, as strong as Nvidia’s data center business is, with data centers playing a large role in its overall revenue, continued weakness in certain other segments, particularly the automotive space, is hurting Nvidia’s margins. It will probably be lowered a bit (global EV sales are depressed, after all).
Ultimately, Rowland predicts that NVIDIA will report quarterly revenue of approximately $21.5 billion next week, which, by the analyst’s own logic, could be a disappointment for investors ( That’s not even $1.5 billion above consensus estimates). In the short term, this could lead to him seeing Nvidia stock fall post-earnings. However, in the long term, the analyst still has a “positive” (i.e. buy) rating on Nvidia stock, and he has set a price target for the stock of $850, with He predicts a 17% rise. (Click here to see Roland’s track record)
But what does broader market sentiment suggest? NVIDIA stock has an average price target of $703.30, despite consensus ratings of 34 Buys and 4 Holds. shows the in-range trajectory of . Upcoming earnings reports could prompt analysts to recalibrate their targets, potentially closing the gap. (See NVDA stock price prediction)
To find good ideas for trading stocks at attractive valuations, visit TipRanks’ Best Stocks to Buy, the tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. Content is for informational purposes only. It is very important to perform your own analysis before making any investment.
