Nvidia Corporation (NASDAQ:NVDA) reports in a few hours, and when it does, bulls will watch the results closely.
NVDA stock trades at 52-week highs and the valuations are unfavorable for value investors. At a 48X forward price-earnings, Nvidia does not have much room to miss on expectations.
Markets expect the company to report earnings growth of around 138% for this year, compared to the 22% EPS growth in the past five years.
Analyst Estimates on NVDA Stock
Of the 23 analysts covering Nvidia, the average earnings estimate is 70 cents a share, which is up from 40 cents a share last year. The EPS estimate range is between 66 cents to 79 cents a share. The average revenue estimate is $1.96 billion and the range is between $1.95 billion to $2.04 billion.
On July 24, Canaccord Genuity raised its price target on NVDA stock from $155 to $180. An analyst at B. Riley set a $200 price target. This should frighten bulls: Too many analysts are publishing upgrades for the stock and potentially setting too high an expectation for Nvidia to meet, let alone exceed.
Fortunately, chances are good that Nvidia will report another blowout quarter, supported by revenue from its parallel computing business and discrete GPU (“dGPU) unit. Advanced Micro Devices, Inc. (NASDAQ:AMD) is in the midst of releasing Vega, a high-end GPU that could potentially compete with Nvidia’s GTX 1080 and GTX 1070.
Yet in the quarter, Nvidia faced no pressures for the GTX cards, which suggests the company enjoyed higher profit margin from the dGPU market.
Investors should not ignore that Vega’s release is months late. It gives Nvidia’s GTX card the advantage of maturing its driver software in that time. Initially, the Vega could have bugs and will not have software optimized to run optimally. Nvidia is unlikely to face any hit to sales for the GTX cards for at least a few months.
In the data center business, Nvidia similarly faces little threat from Intel Corporation (NASDAQ:INTC). Powerful GPUs are the key for parallel computing and Intel does not have an answer to Nvidia’s solution here.
For software dependent on raw CPU power, Intel will be busy squaring up against AMD’s EPYC server processors.
AMD Earnings Forecast
Looking ahead, AMD’s Vega could start to nibble at Nvidia’s high-end dGPU market share. AMD’s Polaris is at a distinct advantage over Nvidia’s mainstream GPUs when it comes to crypto currency mining. Nvidia said it would build a card specifically for the market. In the meantime, AMD has an edge.