Nvidia (NVDA): Will the Stock Return to New Highs?
Nvidia (NVDA): Will the Stock Return to New Highs?
Nvidia (NVDA) blew away quarterly earnings expectations on Tuesday. Despite the impressive beat, the stock price fell on Wednesday. Where next?
- Nvidia posted EPS of $4.02 on an adjusted basis.
- Revenue grew 206% for the quarter from a year ago and 34% from the prior quarter.
- Expenses rose just 13% from a year ago.
Nvidia (NVDA) reported fiscal quarterly results Tuesday after the bell and the chipmaker blew away expectations. Despite the impressive beat, the stock price fell on Wednesday. It looks like some investors may have been expecting even better results. Where will NVDA go from here?
Nvidia: What did the numbers show?
Nvidia posted earnings per share (EPS) of $4.02 on an adjusted basis, which beat expectations of $3.37. Revenue for the quarter came in at $18.12 billion. That was also well above the $16.19 billion analysts were looking for.
Revenue grew 206% for the quarter from a year ago and 34% from the prior quarter, according to an Nvidia press release. The company’s per share earnings grew almost six times from last year and 49% from last quarter. Jensen Huang, Nvidia’s founder and CEO, attributed the growth to accelerated computing and generative AI.
Huang sounded optimistic about the company’s future, referencing several emerging growth drivers, which include a buildup in national and regional cloud service providers (CSPs) investing more in artificial intelligence, companies adding AI copilots and enterprises creating custom Ais for industry automation.
Other financial metrics also posted impressive growth, with operating income rising 652% from a year ago and net income rising 588% for the same period. Expenses rose just 13% from a year ago.
Some other highlights, According to Nvidia:
- HGX 200 with Tensor Core GPU, the first with HBM3e memory.
- AI foundry service announced to help accelerate custom generative AI applications fine tuning and development.
- Launched DLSS 3.5 Ray Reconstruction.
- Mercedes-Benz is using NVIDIA Omiverse.
- Furthered collaboration with Foxconn.
Why is the stock price falling?
The numbers were great, so why is the stock price falling? When this happens, the answer is usually found in the company’s forward guidance and how it compares to investors’ expectations.
Nvidia’s guidance is positive, with the fourth-quarter outlook showing revenue expectations at $20 billion (+/- 2%), non-GAAP gross margins at 75.5% (+/- 50 basis points), and non-GAAP operating expenses at $2.2 billion.
While very impressive, the stock price is up almost 250% on a year-to-date basis. Investors have been pricing in massive growth compared to the Nasdaq-100’s 45.6% growth over the same period. It would be an amazing accomplishment for the stock price to continue climbing at that rate, but it would require a beat on the loftiest expectations. For example, some analysts were expecting revenue of over $21 billion.
For now, however, some investors are taking their profits here. At the same time, others who want to join the rally are likely waiting for a better entrance. Where can that be? The 100-day Simple Moving Average could mark a potential spot to start buying, which currently sits around 449.90 (blue line on the chart below).
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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