Nvidia (NASDAQ:NVDA) is set to release its fiscal Q2 2025 earnings, and all eyes are on the company’s performance. The tech giant has been a market leader, delivering substantial returns for investors. However, with a year-to-date gain of nearly 150%, questions are being raised: Has Nvidia stock run too far, too fast ahead of its Q2 earnings?
Nvidia’s Remarkable Performance
Nvidia has been the top performer in the S&P 500 Index ($SPX) for two consecutive years. The company’s stock has seen a meteoric rise, especially in the first half of 2024. However, the stock has traded sideways in recent months, a stark contrast to the volatile price movements seen in previous years. Nvidia’s brief dip below $100 earlier this month, which pushed the stock into bear market territory, was met with a swift rebound, regaining its $3 trillion market cap. This recovery has been fueled by market optimism ahead of Nvidia’s Q2 earnings report.
Nvidia Q2 Earnings Preview
Nvidia’s Q1 earnings were nothing short of stellar, with the company surpassing both revenue and profit expectations. This resulted in a significant stock price surge, adding $200 billion to its market cap in just one day. For Q2, Nvidia’s management has guided revenues at the midpoint of $28 billion, which exceeds the $26.7 billion initially expected by analysts.
Currently, analysts anticipate Nvidia to post revenues of $28.6 billion for the quarter ending July 28, 2024. Earnings per share (EPS) are forecasted at $0.59, representing a year-over-year increase of 136%. This indicates continued strong growth, but the key question remains: Is this growth already priced into the stock?
Key Factors to Watch in Nvidia’s Q2 Earnings Report
Investors will be closely watching Nvidia’s revenue guidance for the current quarter. Analysts expect Nvidia’s revenues to rise by 74%, with growth projected to slow to 57% in the subsequent quarter. Although these are still impressive figures, they are from a higher base, making continued outperformance more challenging.
Another critical point to monitor is Nvidia’s commentary on its upcoming Blackwell GPUs, which have reportedly faced shipment delays. The success of these GPUs is crucial for Nvidia to maintain its leadership in the AI chip market. Additionally, Nvidia may address the antitrust probe initiated by the U.S. Department of Justice concerning its dominance in the AI chip market. The company’s business in China is also under scrutiny, as U.S. export restrictions have impacted sales of Nvidia’s high-end AI chips in the region.
Analyst Sentiment and NVDA Stock Forecast
Nvidia has a consensus “Strong Buy” rating from 39 analysts, with a mean target price of $141.65, approximately 13.7% above current levels. Some analysts, like those from KeyBanc and Goldman Sachs, expect Nvidia to beat earnings expectations and provide optimistic guidance for the upcoming quarters. The Street-high target price of $200 suggests a potential 60% upside, reflecting continued bullish sentiment among analysts.
Is Nvidia Stock a Buy Ahead of Earnings?
The broader tech industry, particularly hyperscalers like Meta Platforms (NASDAQ:META), remains committed to significant AI investments. This bodes well for Nvidia, given its near-monopoly in the AI chip market. However, the recent sharp rally from the August lows means the margin of safety for new investors has diminished.
While Nvidia is poised to report strong earnings, the stock may not have as much room to run post-earnings as it did in previous quarters. Investors should weigh the potential upside against the current lofty expectations.
In conclusion, Nvidia’s Q2 earnings report will be a critical event, not just for the company but for the broader tech sector. While the stock remains a strong growth name, the current valuation warrants cautious optimism.
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