Nvidia earnings call preview: How high can we go in 2024?

Nvidia earnings was the standout asset in tech portfolios throughout 2023. They recorded over 30% gains by the end of the fourth quarter. It outperformed peers in the tech space such as Amazon and Alphabet, after quadrupling their stock value in 15 months.

The company’s recent performance has been impressive, given that it was not driven by a Covid-like global crisis. Analysts largely attribute its success to product fitness and design prowess, coupled with the skyrocketing global demand for AI microchips and semiconductors.

What to expect from the earnings call

For analysts and investors, the Wednesday, 21 February, earnings call can’t come soon enough. The Zacks Consensus Estimate has predicted earnings per share of 4.51 dollars on revenues of 20.18 billion dollars for the fourth quarter. The projected expansion in revenue largely stems from the high demand for its products, with demand-side pressure at times outweighing supply.

Previous quarter earnings

If Nvidia reports earnings that border the Q4 consensus estimate of $20.18 billion (up from the previous quarter’s $18.12 billion), it would represent revenue growth of 11.37%. Despite export restrictions to China, Q3 earnings set a record thanks to strong demand in Singapore, Taiwan, and the US. 

One of Nvidia’s biggest money makers is its data centre. Their revenue was up 279% from a year ago at $14.5 billion in the last quarter. As the chip wars escalate in the age of AI, stakeholders have raised concerns about supply-side issues. Questions arise regarding whether the company can sustain its winning streak while competitors like AMD lurk in the background.

Company CFO Colette Kress has also addressed supply concerns, “Our supply over the next several quarters will continue to ramp as we lower cycle times and work with our supply partners to add capacity.”

Share price and general outlook

Nvidia was the star stock of 2023, with a general upswing that saw the stock achieve triple digit growth. Technicals hint at a continued upward trend with the 20 SMA still well above the 100 SMA. This indicates a continued bullish sentiment.

Nvidia stock growth chart 

Despite the growth prospects and the clear bullish sentiment, traders should note that the company has a relatively high price-to-earnings ratio of 95.22 as at Wednesday, 14 February 2024. The high ratio might suggest that investors consider the company overvalued, potentially signaling an impending price correction. It could also mean that investors are willing to pay a premium because they believe in the company’s future growth.

Investors will keep a keen eye on whether Nvidia can keep up its historic data centre segment growth. It will also be interesting to watch if the company can maintain its market share in a highly competitive space. Its product road map raised concerns with the US instituting export restrictions to keep Nvidia’s most powerful chips, A100 and H100 away from Chinese hands.

Despite this hurdle, analysts are wary of the possibility of further restrictions affecting the company’s relationship with the Chinese market. 

Wednesday's Nvidia earnings call may offer additional insight into the company's approach to restrictions and its near-future product plans. Traders should watch the numbers to see if the company beats analysts Q4 estimates, as this could impact short-term price action.

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Disclaimer:

This information is considered accurate and correct at the date of publication. Changes in circumstances after the time of publication may impact the accuracy of the information. 

The performance figures quoted refer to the past, and past performance is not a guarantee of future performance or a reliable guide to future performance. Trading is risky. We recommend you do your own research before making any trading decisions.

The information contained within this blog article is for educational purposes only and is not intended as financial or investment advice. No representation or warranty is given as to the accuracy or completeness of this information.