Can NVIDIA keep rallying as it reports Q3 earnings?

Having seen a remarkable recovery from the early part of the year, NVIDIA seems well placed to benefit from a recovery in the global economy.

When is NVIDIA’s earnings date?

NVIDIA reports third quarter (Q3) results after the bell on 18 November.

NVIDIA earnings – what does the Street expect?

Reuters has a forecast of $4.4 billion in revenue, up 46% over the year, while net income is expected to rise to $1.6 billion, up 45.8%.

In Q2, NVIDIA beat forecasts by a substantial margin, helping it to weather the Covid-19 storm. The group has been both hurt and helped by the pandemic. Its gaming arm has seen a substantial uplift in revenues as more people stay home anI'm bd play games using NVIDIA’s products, but the professional visualisation division had suffered as companies delayed spending on items like workstations. Investors should look out for a continuation of these trends, although the professional division may see a pickup as companies attempt to return to a more ‘normal’ pattern of work.

In addition, investors should watch out for commentary on the acquisition of ARM from Softbank. If this deal, worth $40 billion, does go through, it will provide a significant boost to revenues in NVIDIA’s data-centre business.

How to trade NVIDIA’s earnings

Of the 38 analyst ratings for NVIDIA, 31 are ‘buys’, with six ‘holds’ and just one ‘sell’. The median target price is $600, an 11% premium to the current price of $540.

NVIDIA has beaten estimates in seven of its last eight reports, the last miss being the Q3 2018 report. Its last earnings report saw the stock drop 2.6% on the day.

NVIDIA stock price – technical analysis

Like many tech stocks, NVIDIA has had a great year, even when the Covid-19 selloff in February and March is included. Since mid-March, the stock has rallied in a relentless fashion, holding mostly above the 50-day simple moving average (SMA) - currently at $530.98. Weakness in late October found support at $492.00, so this is the first area to watch in case of a renewed drop. Meanwhile the stock has yet to breach August’s record high at $589.00, so this is the level to watch on the upside.

NVIDIA storming ahead

As the world looks forward to a post-Covid future, NVIDIA seems to be in a strong position. Revenues continue to grow, and as vaccines are brought into use a more ‘normal’ world should re-emerge, boosting performance. While we have seen some move away from high growth tech names like NVIDIA, its strong performance and excellent price trend should keep it on many investor watchlists.

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