"The Most Important Stock on Earth" Has the Entire Market on Edge!

金十数据APP · 2024-02-21T15:15:21.000Z

NVIDIA's (NVDA.O) market-leading rally has even led bulls to question whether better-than-expected earnings will be enough to push the AI chip maker's stock price higher. Nvidia will release earnings after the U.S. stock market closes on Wednesday. Data compiled by foreign media show that Wall Street expects Nvidia to record outstanding performance again, with revenue expected to exceed US$20 billion, a year-on-year increase of nearly 240%, and achieve triple-digit growth for the third consecutive quarter. The key now for Nvidia and the market as a whole is whether the company can meet revenue expectations and assure investors of further growth in its field of generative artificial intelligence. Goldman Sachs Group Inc.'s trading arm called it "the most important stock on the planet" given its outsized impact on stock market returns this year.

Nvidia Corp’s (NVDA.O) market-leading rally has even bulls questioning whether better-than-expected earnings will be enough to push the AI ​​chip maker’s shares higher.
Nvidia will release its earnings report after the U.S. stock market closes on Wednesday. Data compiled by foreign media show that Wall Street expects Nvidia's performance to be outstanding again, with revenue expected to exceed $20 billion, a year-on-year increase of nearly 240%, and a triple-digit growth for the third consecutive quarter.
The key now for Nvidia and the market as a whole is whether the company can meet revenue expectations and assure investors of further growth in generative artificial intelligence. Given its outsize influence on stock market gains this year, Goldman Sachs Group Inc.’s trading arm called it “the most important stock on the planet.”
Kim Forrest, chief investment officer at Bokeh Capital Partners LLC, said:
“Nvidia has been the mover and the one stock that really sets the tone ... That’s why everyone is obsessed with it and watching to see if it puts up impressive numbers again.”
The stock is now worth more than $1.7 trillion. It has the third-largest weighting in the S&P 500, behind Microsoft and Apple, so moves either way can add or eliminate billions of dollars in value for investors.
The market’s reaction to Nvidia’s two previous earnings reports didn’t inspire optimism. The company’s stock fell after its November report, which failed to meet high market expectations. In August, the stock plunged, erasing nearly all of its gains after its impressive earnings reports. However, in both cases, the stock price eventually continued to rise.
Michael Sansoterra, chief investment officer at Silvant Capital Management, believes Nvidia's stock has further upside given its leadership in artificial intelligence.
“It’s hard to say whether you’re going to get a gain on earnings day, but I don’t think it matters.”
Even after Tuesday's plunge, Nvidia is still up 40% in 2024, adding about $490 billion to its market value. It surged 239% last year.
Wall Street is generally bullish on the stock. Analysts tracked by Bloomberg have 60 buy ratings, 5 hold ratings and 1 sell rating on the stock. The average 12-month price target is about $734, which implies an upside of about 6%.
Piper Sandler analysts led by Harsh Kumar expect Nvidia to report modest revenue and earnings per share growth, with strong forward guidance for data center revenue, but they said in a note last week that still may not be enough to boost the stock.
Based on these results, Kumar wrote in the report, "given the recent rally in the first two months and the extremely high expectations for earnings, we believe the stock will remain flat." However, they still raised their target price from $620 to $850 in the report.
Bank of America analysts also said the post-earnings pullback in the stock price was not surprising, although they said the company's results supported its strong performance at the beginning of the year.
"One explanation for Nvidia's move is fear and greed, and investors' indiscriminate pursuit of AI," Bank of America's Vivek Arya wrote in a note last week, reiterating that Nvidia is a top pick. "We acknowledge these factors but believe they understate the company's solid execution and EPS revisions," he said.
If Nvidia's stock price is shaken after the earnings report is released, there will be a group of investors ready to take advantage of the opportunity to buy. Gene Munster, managing partner of Deepwater Asset Management, said:
“Any kind of pullback will be viewed as a limited window where investors who want to hold AI for three to five years will have an opportunity to buy.”
Given that the market's expectations for Nvidia's future are so high that its valuation still looks relatively cheap. Currently, Nvidia's expected price-to-earnings ratio is about 32 times, while the Nasdaq 100's price-to-earnings ratio is about 25 times. Munster said:
“For a stock that’s up more than 200% over the past year, it’s surprising that it remains attractively priced.”
The article is forwarded from: Jinshi Data