The central theses
- Nvidia shares rose on Monday ahead of the company’s high-risk first-quarter earnings report, which will be released after the market closes on Wednesday.
- Consensus estimates showed analysts revising expectations upward ahead of the report.
- Optimistic investors expect the chipmaker’s revenue and forecasts to beat analysts’ estimates by more than $1 billion.
- Analysts suggested that investor expectations may be too high and could contribute to a sharp move in Nvidia’s stock price following the company’s earnings release.
Shares of Nvidia (NVDA) rose in intraday trading on Monday ahead of the chipmaker’s highly anticipated first-quarter earnings report after the bell on Wednesday.
Analysts raised their estimates ahead of Wednesday’s report, although some expressed concerns that investor expectations for the chipmaker could be even higher, potentially leading to a big move in Nvidia’s stock price following the company’s earnings release.
Nvidia shares rose 2.4% to $947.10 around 1:40 p.m. ET on Monday, nearly doubling their value since the beginning of the year.
Rising estimates and price targets
Ahead of Nvidia’s earnings announcement on Wednesday, analysts increased their expectations for the chipmaker, according to consensus estimates compiled by Visible Alpha. Analysts said they now expect Nvidia’s revenue to come in at $24.74 billion, while net income will come in at $12.91 billion, or $5.19 per share, with all three numbers slightly above forecasts of the last week.
Higher expectations for Nvidia’s results have led some analysts to also raise their price targets on the stock. Barclays analysts on Monday raised their price target on the stock to $1,100 from $850, saying their checks suggest upside of more than $1 billion in the first quarter and upside of $2 billion US dollar in the July quarter.
Stifel analysts also increased their price target to $1,085 from $910, calling the chipmaker a “top pick in the AI infrastructure investment theme.”
Investor expectations could be even higher
Analysts at Bank of America reported that based on conversations with investors, “expectations appear to be well above consensus estimates, as usual.”
They said optimistic investors expect first-quarter revenue of $26 billion, above analysts’ estimates, and that guidance for the July quarter will be close to $28 billion. In comparison, consensus estimates compiled by Visible Alpha have analysts forecasting second-quarter revenue of $26.96 billion.
The gains could be followed by a significant stock move
Given investors’ high expectations, analysts expressed concern that an increase in earnings alone may not be enough to impress investors. “Even if NVDA were to potentially meet these optimistic expectations, the stock could still react unfavorably,” analysts at Bank of America wrote.
Analysts at Susquehanna said that while they expect “another strong report” from the chip maker, they pointed out that Nvidia will expect “at least an increase of 2024” due to “elevated expectations as the sell-side increased their estimates for July/2024.” $1.5 billion” for a muted forecast response.
Prices in the options market suggest traders expect shares to move about 10% in either direction.
Significant moves before and after an earnings report have been the norm for Nvidia in recent quarters. Nvidia shares had fallen ahead of the company’s earnings report in February and rose more than 9% in extended trading after the results beat estimates. The earnings announcement pushed Nvidia’s market cap to over $2 trillion in the following days.