NVIDIA (NASDAQ: NVDA) is preparing to release its second-quarter results on August 28, and sentiment toward the stock on Wall Street has moved in a bullish direction. In a note published on Monday, it said: Goldman Sachs Analyst Toshiya Hari reiterated his buy rating for the market leader in artificial intelligence (AI) and maintained his price target of $135 per share.
At the time of the note’s publication, Hari’s target for the stock suggested potential upside of about 9%, but subsequent earnings have pushed down the implied upside. Is Nvidia a worthwhile buy given its highly anticipated earnings report?
Can Nvidia exceed expectations again?
Goldman’s recent report on Nvidia not only highlighted Nvidia’s strong competitive position in AI and other accelerated computing applications, but also left open the possibility of a positive rating revision in the earnings report. In its first-quarter report released in May, Nvidia forecast second-quarter revenue of around $28 billion and gross margin of 74.8%. The company also said it expects non-GAAP (adjusted) operating expenses of $2.8 billion for the period.
Over the past year, Nvidia has repeatedly delivered results that have far exceeded both its own targets and those of Wall Street, so expectations are very high. For example, HSBC expects the technology leader to record sales of $30 billion. The average analyst estimate, however, is for sales of $28.6 billion.
Investment reports and guidelines from Microsoft and other key customers suggest there is a good chance Nvidia will beat average analyst estimates again, but the stage may be set for valuation volatility in the near future. The AI frontrunner may need to post revenue and earnings that clearly above Wall Street’s average targets to trigger another major rally in the near term.
Nvidia still appears to be a worthwhile buy ahead of its earnings release, but investors may want to use a dollar-cost averaging strategy to minimize risk.
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HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Keith Noonan does not own any stocks mentioned. The Motley Fool owns and recommends Goldman Sachs Group and Nvidia. The Motley Fool recommends HSBC Holdings. The Motley Fool has a disclosure policy.
1 Wall Street Analyst Thinks Nvidia Stock Is Heading to $135. Is That a Buy? was originally published by The Motley Fool
