Nvidia's Shares Predicted to Surge between 10% and 28% by Certain Wall Street Experts. Is it Worth Investing Prior to November 20th?
Nvidia's Shares Predicted to Surge between 10% and 28% by Certain Wall Street Experts. Is it Worth Investing Prior to November 20th?
On the 20th of November, this upcoming Wednesday, the entire investment community will be on edge, anticipating a crucial announcement. Contrary to expectations of a Federal Reserve meeting or an update on job growth, the focus is on Nvidia's (NVDA 0.70%) third-quarter earnings results. Scheduled for reporting, Nvidia is known as the gold standard for assessing the artificial intelligence (AI) market's health. A positive report typically inspires a surge in the stock, potentially boosting the entire market.
I've frequently expressed my optimistic viewpoint on Nvidia. This company, in my opinion, serves as a benchmark for the AI market's condition. If the earnings report shines positively, expect an upward trend in the stock to create a favorable ripple effect across various capital markets.
I'd like to delve into the current scenario and underscore why this upcoming earnings report holds significant importance. I will also share some recent analyst price targets as the report approaches.
Analysts across Wall Street are optimistic before the earnings release
Quarterly earnings reports are usually an opportunity for equity research analysts, who engage in conversing with management teams to gain insights into catalysts, operational challenges, and everything in between.
Investment banks then update their reports and offer price estimates based on the analysts' findings. An investor note might be released before the earnings call, but it's infrequent.
This week, however, Morgan Stanley and UBS have both upgraded their price targets for Nvidia stock, to $160 and $185, respectively. This suggests a potential increase of around 10% to 28% from the current market close (as of November 11th).
What should investors take note of?
During earnings reports, investors usually concentrate on recognizable metrics such as revenue, gross margin, and profitability. But unlike traditional reports, Nvidia's third-quarter earnings next week are going to be an atypical affair.
Recent announcements from other big tech companies signify increased investment in AI infrastructure. According to Daniel Ives of Wedbush Securities, the next few years could see more than $1 trillion in AI capital expenditures (capex). This capex cycle might serve as a proxy for Nvidia's growth prospects.
The key question for investors is to decipher how much of a tailwind these infrastructure investments will provide for Nvidia. The financial guidance from management will hold significant importance in this regard.
As the presentation of Nvidia's new Blackwell GPU is expected on the earnings call, Morgan Stanley projects sales of at least $10 billion for this year. Nvidia CEO Jensen Huang has even hinted that demand for these new chipsets exceeds supply.
Although these developments bode well for Nvidia, it is essential to consider that rumors suggest the company might shift order flow away from one of its key partners, Super Micro Computer, as the IT architecture specialist continues to struggle.
Despite the promising aspects, I cannot ignore the possibility of operational hurdles related to manufacturing and production that could potentially hinder Nvidia in the short term.
Warren Buffett's wisdom comes to mind
One of Warren Buffett's well-known statements is "to be fearful when others are greedy and to be greedy when others are fearful." In my estimation, investors may be growing a tad too greedy with Nvidia stock. Here's a timeline that elucidates my reasoning:
- December 30, 2022: OpenAI released ChatGPT to the general public, resulting in a 758% increase in Nvidia's share price.
- Past 12 months: Over the past year, Nvidia stock has increased by 205%.
- Year till 2024 (up till mid-November): Through mid-November, Nvidia stock has risen by 198% this year.
In my opinion, I believe Nvidia stock will likely rise following its earnings report next week. However, my focus is not solely on the short-term surge but rather on the long-term narrative. In my view, AI is here to stay and Nvidia will likely maintain its prominence as a key pillar supporting artificial intelligence.
Even so, the astronomical increase in share price gives me pause. As I recently articulated, Nvidia stock appears to embody the qualities of a lucrative trade as opposed to a long-term buy-and-hold position.
With all these considerations in mind, I lean towards listening to Huang and the team's insights during the earnings call and assessing if it's prudent to expand my Nvidia position subsequently.
After analyzing the current market sentiment and recent analyst price targets, investing in Nvidia stock before its third-quarter earnings report could yield significant returns, with potential increases of up to 28% based on Morgan Stanley and UBS's upgraded price targets.However, it's crucial to keep an eye on potential operational hurdles related to manufacturing and production that could impact Nvidia in the short term.