Nvidia Earnings Preview

Can the momentum continue?

Long time no newsletter!

As I mentioned on Friday’s recap show, there’s a good chance I’m hired by a large research firm. I’m currently in the final stages of the hiring process. I’ll still have access and freedom to share research ideas and topics on YouTube, but most will obviously be saved for the paying clients.

If for some reason that opportunity doesn’t materialize, plan B is to utilize this newsletter to share exclusive videos and research. More on that later if that’s the route we have to take.

Let’s get to the business at hand.

Nvidia NVDA 0.00%↑ earnings are Wednesday May 24th. Below you will find estimates, technical analysis and my thoughts on a stock that has run over 150% from the October 2022 lows.

Q1 Revenue Estimates

Low: $6.31B
Midpoint: $6.52B (-21.35%)
High: $6.75B

You know how the Wall Street estimate game is played. This time last year, Q1 2024 revenue estimates for Nvidia were $9.3B+ !!!!

Despite the AI hype train, those estimates have been slashed down to the current $6.52B estimate so Nvidia can beat when the company announces. Just remember when the do, a year ago we were expecting $9.3B+ in revenue.

With analysts moving the goal posts, it’s no surprise since 2019 Nvidia has beat revenue estimates every quarter. However, it’s rarely a huge beat, with the average over the past several years being a ~ 3% beat over estimates.

A 3% increase on the midpoint would take you near the high-end revenue estimate of $6.75B.

I would be shocked if Nvidia doesn’t come toward the high-end $6.75B revenue estimate. Google GOOGL 0.00%↑ GOOG 0.00%↑ , Tesla TSLA 0.00%↑ Microsoft MSFT 0.00%↑ and Meta META 0.00%↑ explicitly called out purchases of Nvidia’s products on conference calls or company presentations.

Clearly with Nvidia stock up 95% YTD, investors could care less about current quarter revenue shrinking 21% Y/Y.

They are banking on Nvidia maintaining a monopoly-like 85% of the GPU market for several years to come.

With the likes of AMD AMD 0.00%↑ and the aforementioned mega-cap tech stocks working on their own GPU silicon, (not to mention the evolution on how large language models are trained) it's doubtful Nvidia is the only game in town for long.

Other signs of worry is when Taiwan Semi reported earnings a few weeks ago the CEO didn’t sound too excited about a rapid recovery.

However, due to weakening macroeconomic conditions and softening end market demand fabless semiconductor inventory continued to increase in the fourth quarter and exited 2022 at a much higher level than we expected. In addition, the recovery in end market demand from channels reopening is also lower than our expectation. Therefore, the fabless semiconductor inventory adjustment in first half '23 is taking longer than our prior expectation. It may extend into third quarter this year before rebalancing to a healthier level.

C.C. Wei Taiwan Semiconductor TSM 0.00%↑ CEO

Aside from Apple AAPL 0.00%↑ Nvidia is one of TSM largest customers. A weak outlook by TSM doesn't bode well for Nvidia guidance.

Speaking of guidance. Here are the revenue estimates for Nvidia for Q2:

Q2 2024 Revenue Estimates:

Low: $6.78B
Midpoint: $7.08B (+5.62%)
High: $7.8B

Again, clearly investors paying 60x forward earnings and 23x sales don’t care Nvidia’s revenues have fallen off a cliff and aren’t anticipated to rebound until late this year.

How much of that is already priced into the shares. I believe all of it and then some.

Technically the stock has obviously been on a rocket ship, but we have to assume it will run out of gas sooner rather than later.

But there’s no sign of the stock rolling over yet. The key level is $260 - a break below that and it’s a decisive break in trend. Current shareholders should continue to hold. Momentum junkies can play the re-test of the highs with a stop-loss at/near the $260 level.

I’ll do an earnings video the day of earnings with Nvidia.

Until then, stay safe and stay happy. I’ll keep you updated on my next moves research wise, I should have clarity on that soon.

Thanks as always.

Colin