New Bullish Price Target for Nvidia With Critical Earnings Due
The AI chip leader will report the most consequential financial results in some time and we've got a trade idea.
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Mighty Casey is on deck.
No, not at the bat, not yet anyway. On Wednesday afternoon, the most important earnings release of this season as well as the past few, is due. High-end AI-capable chip designer Nvidia NVDA is set to publish the firm's fiscal fourth quarter financial results after the closing bell on Wednesday afternoon. Not just results, but guidance will be in focus as the landscape for the proliferation of technology based on generative artificial intelligence has, if not become more uncertain than it was, at least become a little murky.
The issues at hand? For the first time in a while, Nvidia investors have more to worry about than simply how overwhelmingly terrific the firm's sales growth will be and how incredibly awesome margin performance will be. About a month ago, Chinese start-up DeepSeek released what was thought at the time to be possibly a far less expensive, more efficient and less demanding in terms of high-end chips way to train and run AI-based applications.
The second issue was the rollout of the firm's next-generation Blackwell chip platform, which is the successor to the highly-successful platform built on the Hopper architecture. The firm's launch of its Blackwell architecture hit a few snags on its way to market, though the firm has publicly claimed that all systems were up and running and the rollout was on track. While that was indeed an obstacle, it is believed that demand for a lower-end Blackwell product known as the HGX B200 and the H20 to Chinese clients may have surprised to the upside. The H20 is basically a scaled-down version of the Hopper that is compliant with the U.S. restrictions on exports of advanced technology to Chinese customers.
So, readers, traders and investors can see that though the headline numbers for the fourth quarter may not be at all that much risk, the composition and sustainability of those Q4 numbers will be open to scrutiny as will the firm's forward-looking guidance.
Let's not forget the news on Monday that analysts at TD Cowen had reported that they thought Microsoft MSFT might be scaling back on its spending plans for the coming year when it comes to the buildout of its data centers. Microsoft denied the report, but if true, this would directly impact a firm like Nvidia, especially if this became something of a trend across all of the hyper-scalers.
Expectations for Nvidia Earnings
Currently, Wall Street consensus view is for an adjusted EPS of $0.85 on revenue of about $38.15 billion. This would compare very well to the year-ago results of $0.52 on $22.1 billion and would be good for earnings growth of 63% on revenue growth of 73%. That would be incredible growth for every firm not named Nvidia.
For Nvidia, this quarter will be the slowest pace of year-over-year earnings and revenue growth since Q1 2023. The slowdown in the pace of growth is understandable and had to be expected due to the now very large numbers involved. This deceleration, as the numbers remain impressive, will continue. That said, this pace will remain robust relative to the rest of corporate America for the near- to medium-term future.
For the full fiscal year just started, sales growth is expected to print at close to 52%. This would come after a fiscal year just completed where the growth of sales will be something like 112% if the projected Q4 numbers are accurate. How well the stock does post-earnings may have a lot to do with how well CEO Jensen "The Fonz" Huang can tap dance.
Nvidia Stock Chart
This is a mixed bag of shells right here. Readers will easily see a double-top pattern of bearish reversal that appeared to work spectacularly as the DeepSeek news made headlines.
The share price broke the downside pivot and even lost contact with its 200-day SMA, only to find some help and rally from there. The stock then took back its 21-day EMA and 50-day SMA but is having trouble holding those lines. Note that the DeepSeek-related gap lower in late January took only a few weeks to fill implying that investors, though rattled, are not all that nervous of that one issue.
Note that Nvidia's reading for relative strength is now neutral, but heading the wrong way and the daily MACD is just mildly bullish. The histogram of the nine-day EMA is above zero and the 12-day EMA is above the 26-day EMA (gold line) and those are bullish indicators, but they are all close enough to zero to get in some trouble.
My current pivot? The $153 apex of the double-top pattern. My bullish case target price? $176. I add? Not ahead of earnings. Maybe post-earnings with the 50-day SMA in the rear-view mirror. I panic? On a second loss of the 200-day SMA in less than a month.
An idea for the risk-averse long equity crowd might be to get long a $126/$120 bear put spread for a rough debt of $2 or less. Yes, this would increase the net basis of the protected shares by those $2, but in case of a post-earnings meltdown, would at least extract $6 worth of capital from each share, netting $4.
At the time of publication, Guilfoyle was long NVDA and MSFT equity.
