Nvidia will announce its third-quarter earnings after market close on Tuesday. Its announcement will complete the Magnificent 7 earnings for the quarter. Yesterday the company’s stock reached a record high of $504.09 per share. The current stock price is trading down -$3.93 or -0.79% of $500.05. The gains this year have been driven by the AI-driven sales where Nvidia is leading the charge. The stock is up 242% in 2023.
Expectations for Nvidia are high, with Wall Street predicting significant growth compared to the same quarter last year:
- Revenue: Expected at $16.1 billion versus $5.93 billion in Q3 last year.
- Adjusted EPS: Expected at $3.36 versus $0.58 in Q3 last year.
- Data center revenue: Expected at $12.82 billion versus $3.83 billion in Q3 last year.
- Gaming revenue: Expected at $2.7 billion versus $1.57 billion in Q3 last year.
Additionally, investors are keen on Nvidia’s revenue outlook for the fourth quarter, which is anticipated to be around $17.8 billion. The company has previously exceeded expectations in 2023, particularly with its second-quarter results and forward guidance.
However, the stock experienced some volatility following its August report, with concerns over Nvidia’s valuation and the impact of chip restrictions in China. Nvidia has stated that it doesn’t foresee a near-term impact from these restrictions.
Last quarter although earnings came in higher at $2.70 versus $2.08 estimate, and revenues beat expectations ($13.57 billion versus $11.19 billion expected), the stock peaked at $502.66 on the next day. The price moved down to a low price since the last earnings of $392.30 on October 31. It wasn’t until yesterday’s trade that the price surpassed the high price from the day after the earnings report last quarter. How ironic?
The fall from high on August 24 to low on October 31 was a -21.9% decline. The price has rebounded 27.7% since the end of October low.
Nvidia shares are up 27.7% since the October 31 low
It is hard to predict what may happen. However, earnings and revenues are still expected to be much stronger than last quarters while the price is at the levels reached after last quarter’s earnings. So, fundamentally it would seem to be cheaper relatively to last quarters price. Whether it is cheap enough relative to future earnings is the big question.
The stock’s 100-day moving averages at $449.33 (blue line in the chart above). Last quarter the 1st dip low reached down to the rising 100-day moving average and found support buyers. The next fall, took the price below the 100-day moving average, but the momentum stalled well ahead of the rising 200-day moving average (green line in the chart above).
Can the market re-test the 100-day moving average if it wants to? Sure. Can it correct to it even though the earnings and revenues beat? Sure. That’s what you live with when investing/trading in these high-flying stocks. However, like in September, I would expect dip buyers to lean in against that moving average level IF it is retested down the road.