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Nvidia Share Price: What to Expect from Q1 Results

With Nvidia’s share price having fallen 12% from its all-time high in April, can its upcoming Q1 results provide a boost in sentiments?

When does Nvidia report earnings?

NVIDIA Corp is set to release its Q1 financial results on 26 May, after market close.

Nvidia earnings – what to expect

A look at its revenue breakdown reveals that end-user demand for gaming and data centre have widely surpassed pre-Covid levels over the past three quarters. With digital transformation in place, ongoing strength in gaming and data-centre, accompanied with robust interest in cryptocurrency mining, may continue to provide tailwind for its sales and support margins. Key drivers in the near term include its A100 platform for data centres and new RTX Ampere GPUs. Longer-term catalysts may include further expansion of its automotive segment with global shift towards autonomous vehicles.

Investors may be on watch for updates on its ARM acquisition, having faced resistance from several major technology companies and regulators. One may not expect a quick resolve of the situation, potentially dragging into 2022.

A successful combination of both companies will see further push into larger-end markets, namely in mobile and PCs, posing strong competition for Intel and AMD. Nvidia may also take control of ARM’s IP licensing portfolio, which gives it the upper hand in providing ARM’s designs to its competitors. This may result in some form of pricing power, along with cost-savings internally. Generally, the potential acquisition deal is widely accretive for Nvidia and any positive update on the acquisition progress will provide a boost to share price ahead.

On another note, global chip shortages are weighing on chipmakers’ sales potential, particularly with Nvidia being a fabless chip company. One may look out for any updates on the ongoing supply shortage, in comparison to supplies for its competitors. That said, Nvidia’s chips technology is more niche which generally draws higher margins for chip manufacturers, potentially giving it priority in production over the rest.

Nvidia was met with a series of analysts upgrade last week ahead of earnings, suggesting a vote of confidence among analysts for its upcoming results. Its recent announcement of 4:1 stock split may increase the appeal for more retail investors ahead.

How to trade Nvidia earnings

Nvidia’s forward P/E currently stands at 41.8, commanding a significant premium over the technology sector of 18.7 and the semiconductor industry of 17.6.

For the past five years, Nvidia’s earnings per share has been growing at an annual rate of 52.8%, towering above the semiconductor industry average of 21.1%. Looking at its revenue growth, Nvidia’s five-year growth came in at 27.2%, also soaring way above the semiconductor industry average of 6.8%. Therefore, investors may have attributed its lofty valuation with a continuation of its strong sales and earnings growth ahead, potentially bringing its valuation to a more justified level then.

Currently, the stock has 35 ‘buy’ recommendations, six ‘holds’ and two ‘sells’. The Bloomberg 12-month consensus target price of 659.13 suggests a potential 9.9% upside from the closing price of $599.67 at the time of writing.

Nvidia shares – technical analysis

Nvidia’s share price seems to fall within a descending channel, with a series of lower price highs and lower price lows, in line with the weakness in technology sector over the past few weeks. Near-term support may be at US$540, where prices may find support from its 100-day MA in coincidence with the Fibonacci 23.6% retracement level. That said, a break above the upper trend line of the channel may see prices move to test its all-time high at US$650.

Investors may also look out for the 200-day MA line, which has been supporting prices over the past four occasions. One may note that prices have not remained below the 200-day MA since September 2019, despite the Covid-19 induced sell-down in early-2020. Therefore, should prices move lower, one may expect some strength from the bulls in keeping prices above the line.

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