Nvidia Analysts Brace For Another ‘Mic Drop’ Quarter As Stock Takes Off Ahead Of Earnings: Retail Exuberance Abounds

The market is factoring in a double beat but an analyst calls Q3 as a "transitional quarter," which may not matter much for the stock.

Stocktwits Inc

First Published Nov 20, 2024, 3:33 AM IST | Last Updated Nov 20, 2024, 3:33 AM IST

Nvidia Corp. ($NVDA), the frontrunner in the artificial intelligence race, is gearing up to unveil its quarterly results after the market closes on Wednesday. Retail investors are jittery ahead of the results, wondering whether the company can continue to clear lofty goals.

Q3 Expectations: The current Street expectations for the fiscal year 2025 third quarter are for over 80% increases in both earnings per share (EPS) and revenue.

Analysts, on average, expect non-GAAP earnings per share of $0.75 versus the $0.40 reported for the year-ago quarter and the previous quarter’s $0.68.

The Santa Clara, California-based company’s revenue is widely expected to rise roughly 83% from $18.12 billion to a record $33.13 billion. In late August, Nvidia guided revenue to $32.5 billion, plus or minus 2%, leaving a tight margin vs. expectations.

Nvidia expects third-quarter non-GAAP gross margin of 75%, plus or minus 50 basis points.

The company generated about 87.5% ($26.27 billion) of its second-quarter revenue from the data center business, while gaming made up about 11% ($2.88 billion). The data center business comprises Nvidia’s high-performance chips used by hyperscalers and other smaller AI companies.

Morgan Stanley’s Joseph Moore said he expects another "very good" quarter, and Wedbush’s Daniel Ives calls for another "mic drop" performance from the company.

Nvidia Outlook: Analysts currently model fourth-quarter non-GAAP EPS of $0.82 per share and revenue of $37.05 billion. For the year, Wall Street forecasts non-GAAP EPS of $2.86 and revenue of $126.29 billion.

Nvidia investors may seek clarity on the next-gen Blackwell AI chip ramp, especially after recent reports said the it caused overheating at the clients’ end.

Moore sees the third quarter as a “transitional quarter” and does not expect it to be a major catalyst for the stock. But he expects the Blackwell cycle to drive meaningful upside through the second half of 2025.

The analyst has an “Overweight” rating and a $160 price target for Nvidia stock.

Ives said, "Blackwell production and demand appear robust and we expect very bullish commentary from Jensen [Huang] on the conference call which will be a focus of the Street that sends the bears back into their caves and hibernation mode."

Nvidia Stock: The stock rally that began in early 2023, coinciding with the start of the AI revolution, is continuing unabated. The stock has gained about 183% so far this year and is the third best-performing S&P 500 stock.

The strong gains catapulted the company past Apple, Inc. ($AAPL) as the most-valued global corporation earlier this month.

As of 3:50 pm ET, Nvidia stock was up 4.75% to $146.81, off its intraday high of $149.77 hit on Nov. 7.

NVDA sentiment and message volume November 19, 2024, as of 3:50 pm ET | Source: Stocktwits

Retail Sentiment: On Stocktwits, retail was 'extremely bullish' on Nvidia (85/100), with message activity remaining 'high.'

A poll run by Stocktwits regarding retail’s expectations from Nvidia’s report shows that 60% are betting on a third-quarter beat and a post-earnings stock rally. A sizeable 30% see the stock falling despite a beat.