NVIDIA Stock approaches its Q3 earnings report, discover the factors that could drive its price up and whether it’s a buy, hold, or sell opportunity for investors
NVIDIA Corporation (NASDAQ: NVDA) is an obvious choice as one of the biggest names in tech. Understanding NVIDIA Stock and its PerformanceNVIDIA is synonymous with advanced graphics processing units (GPUs) and new-age technologies in artificial intelligence (AI). The stock has performed exceptionally well of late, which is why it can be the center-piece of any investment strategy discussion. As we anticipate the third-quarter earnings report from the company, which will be available on November 20, 2024, the question remains: Purchase Sell Or Hold NVIDIA Stocks? In this article we will discuss the potential catalysts from near-term results, long-term growth drivers, and our trading stance on NVIDIA stock.
NVIDIA Stock May Get a Short-Term Boost From Q3 Results
On Nov. 20, 2024, NVIDIA plans to announce its fiscal 2025 third-quarter results after the close of regular trading. Due to the incredible ability of these companies to beat earnings expectations, analysts and investors alike are looking forward to this report. NVIDIA has also delivered an average earnings surprise of 12.7% in the last four quarters. Such a trend builds expectations that the company may again beat analyst estimates.
Expected Earnings Performance
NVIDIA has guided revenue of more than $32.5 billion or so for Q3, representing an outstanding ~80% growth y/y. EPS is expected to be approximately $0.74, versus $0.34 in the same quarter a year ago; This growth is mostly because of the exponential need for products and solutions related to Artificial Intelligence, especially data centers since enterprises are becoming more dependent on cutting-edge computing capabilities.
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Reactions and Predictions on the Market
Prior to the earnings report, market sentiment was on the bullish side. Expectations are high ahead of NVIDIA results, and analysts have lifted their price targets for NVDA stock:
- Truist Securities: Buy Truist Securities has a target of $167, implying upside of around 19% from recent trading.
- Stifel is even more bullish, increasing its price-target to $180 — for a potential upside of 28%.
The exuberance is driven by strong utilization in data centers and AI applications, which are projected to lead high revenue growth. That’s why most investors think NVIDIA will receive a temporary shot in the arm based on its results in Q3.
Reasons to Feel Long Term Bullish on the Share Price of NVIDIA
Although short-term performance is important for traders and immediate return-seeking investors, long-term growth potential of NVIDIA stock should not be overlooked as well.
AI and Data Center Market Domination
One of the key supporting factors for NVIDIA shares to continue growing in price over the long term is its position as an AI technology leader. Their GPUs play a critical role in algorithms used for machine learning, deep learning and data analytics. NVIDIA benefits a lot from this as more and more industries adopt AI.
- Next-Generation Products: NVIDIA is gearing up for next-gen Blackwell architecture. It’s a new line of GPUs that delivers greater performance and efficiency than all you past GPU models. One analyst said there will likely be a lot of demand for these products as companies line up to upgrade their AI assets.
- Expanding Market Reach: NVIDIA has been extending beyond gaming and graphics to work in automotive technology, healthcare, and other sectors. These markets are other opportunities for revenue expansion because they adopt AI-powered solutions more and more.
Strong Financial Performance
NVIDIA’s strong balance sheet also bodes well for the long-term:
- Consistent Revenue Growth: It consistently posted a robust top line revenue year over year. Its revenue, for example, jumped almost 79% year over year just in its Q2 2024.
High Profit Margins: NVIDIA boasts high profit margins due to its premium pricing strategy and recognizable brand in the tech sector.
- Shareholder Returns: The company has always been returning money to shareholders in the form of dividends and buybacks. Such single-minded emphasis on redoubling shareholder value boosts investor sentiment immensely.
NVIDIA Stock Is Less Expensive — Here’s How to Trade it
There are analysts, nevertheless, who contend that NVIDIA inventory isn’t as overvalued as it appears at face value given its extraordinary boom path. What you should do with this stock will become clearer when you know how to do it.
Valuation Metrics
With the stock presently changing hands at around $147 per share, NVIDIA VR seems to be worth around 42.84 times forward price-to-earnings (P/E) ratios. Now, this number might seem high relative to conventional valuation metrics but context is key:
- Growth Potential: NVIDIA is expected to have a revenue growth rate of roughly 32% over the next five years, which in turn leads many analysts to declare that due to this high growth potential, NVIDIA deserves a higher P/E ratio.
- Relative Valuation: Given its leadership in AI technologies, NVIDIA might be more fairly valued (relative to peers) than the other tech giants playing in the semiconductor game.
Trading Strategies
How should investors trade NVIDIA stock before and after the Q3 earnings report?
- Buying During Dips: Here, there’s a pullback or dip in the market before earnings, buying the shares if investors thinks it has long term potential.
- Options Trading — Buying call options, for example, allows you to have a leveraged upward exposure on the underlying securities with less downside risk. Investors have a chance to benefit from short term movements without having to place large amounts of capital.
- Holds for the Long Run: If the investor has a longer investment time perspective, as long as there is a belief that NVIDIA will continue to grow and prosper by developing innovative products or expanding its markets, holding shares after earnings may be good.
- Set Price Targets: A good way of pricing trading goals is to rely on analyst-led projections. For example, when analysts predict that the price target will rise in response to significant earnings results, an investor should take their actions accordingly.
Conclusion
NVIDIA (NVDA) set to report its Q3 earnings on November 20, 2024, investors need to make some important calls about what they want their positions in NVDA stock to be. This is an exciting time for traders and long-term investors due to strong earnings performance expectations and solid long-term growth prospects.
That means NVIDIA can remain a great play on the tech sector, boosted in the near term by quarterly results and supported long term by rock-solid fundamentals. Buy, hold or sell will ultimately be driven by your investment plan and risk appetite — but it’s clear: NVIDIA is leading the way for technology with bright prospects.