Nvidia's stock was down ahead of its earnings report, which is expected on Wednesday, August 26. The company is the last of the "Magnificent Seven" to report this quarter, and its performance is seen as a key indicator for the AI trade. This decline occurred amidst a broader retreat in tech stocks.
Analysts are keenly watching Nvidia's earnings, with expectations for revenue to be nearly $92 billion, almost double year-over-year, and earnings per share (EPS) close to $2.09. However, the market has high expectations, and anything short of a stellar report could be viewed as a disappointment. HSBC analyst Frank Lee suggested that Nvidia's next growth driver could involve positioning the company as a major contributor to open-source AI, expanding its customer base beyond large tech companies.
The options market, typically active around Nvidia's earnings, was pricing in a relatively small 4.6% move for the stock this quarter, one of the lowest levels in the past decade. Despite this, Nvidia's stock has been treading water, closing at $214.72 on Friday, August 21, and showing a 2.62% loss since its last earnings release on May 20. The company's valuation and the tempering of its super-fast growth rate are key concerns for investors.
Despite the recent flatness, financial models project a strong future for Nvidia. Free cash flow (FCF) for the next 12 months (NTM) could reach $257 billion, assuming a 53.3% FCF margin. This could lead to a fair market value of over $6.59 trillion, indicating a potential price target of $272.22, which is 26.76% higher than its recent market cap of $5.2 trillion. Analysts generally have higher price targets, with an average of $304.12.
Beyond Nvidia, the market is also focused on the annual Jackson Hole Symposium, where economists and central bankers will discuss inflation data. Key economic data expected includes the PCE price index, personal income, and durable goods orders. Other companies reporting earnings this week include CrowdStrike, Synopsys, and Salesforce, with Salesforce expecting EPS near $3.27 on revenue of about $11.3 billion.
