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7 Factors to Watch in Nvidia's Upcoming Earnings: ETFs in Focus

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Nvidia (NVDA - Free Report) shares saw 4.4% slump on Feb 20, 2024 amid varied analyst price target adjustments ahead of its critical fourth-quarter earnings report. The chip giant is set to release its fourth-quarter fiscal 2024 results on Feb 21, after market close. Nvidia is up 44.2% this year.

Nvidia, driven by the AI boom and positive analyst outlooks, achieved its highest monthly market value gain in January. Surpassing Amazon with a valuation of $1.78 trillion, it became the fourth-most valuable U.S. company.

Nvidia, along with Microsoft, Meta Platforms, and Amazon, significantly influences the S&P 500's returns, highlighting the importance of Nvidia's upcoming earnings and outlook for the broader tech and market performance.

Earnings Whispers

Nvidia currently has a Zacks Rank #2 (Buy) and an Earnings ESP of +3.67%. According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings Revision Trend

This largest chipmaker saw positive earnings estimate revisions of 3 cents to $4.54 over the past seven days for the fourth quarter of fiscal 2024. Analysts increasing estimates right before earnings — with the most up-to-date information possible — is a good indicator for the stock. The Zacks Consensus Estimate for revenues are $20.21 billion.

Nvidia is expected to post massive earnings and revenue growth of 415.9% and 234%, respectively, for the to-be-reported quarter. Nvidia’s earnings surprise history is good, as it delivered an earnings surprise of 18.99%, on average, in the last four quarters.

Wall Street’s Expectations

Wall Street anticipates another strong performance from Nvidia, focusing on data-center AI-driven spending. Revenues for data center is expected to be $16.94 billion. With the AI market's peak spending expected ahead, Nvidia's near-term prospects, particularly in cloud computing and AI, seem promising despite potential supply-chain challenges.

On a different note, revenues for gaming are expected to be $2.68 billion, revenues for graphics are expected to be $4.19 billion, revenues for computer & networking are expected to be $15.88 billion and revenues for automative division are expected to be $276 million.

Supply Chain Concerns

Supply-chain issues, particularly with chip-on-wafer-on-substrate technology, could impact Nvidia's outlook. Despite these challenges, demand for Nvidia's AI solutions remains strong, with significant developments expected in its AI-focused lineup, including the launch of the B100 Blackwell chip, per a article.

Challenges and Opportunities

Nvidia faces challenges, including completing AI chip launches in China amidst U.S. export restrictions. However, Wall Street remains optimistic, forecasting a substantial increase in Nvidia's sales for the January quarter, indicating a strong market position and potential for continued growth despite some caution from analysts. Revenues from China are expected to be $3.93 billion while from the U.S. are expected to be $7.50 billion.

Analysts Raising Target Prices Ahead of Earnings

HSBC analyst Frank Lee, who is a bit more cautious, bumped his target by $35, to $835 on Monday, while affirming a buy rating, per the article. However, based on short-term price targets offered by 37 analysts, the average price target for Nvidia comes to $694.44. The forecasts range from a low of $410.00 to a high of $1,100.00. The average price target represents a decline of 4.36% from the last closing price of $726.13.

Broker Rating

Nvidia currently has an average brokerage recommendation (ABR) of 1.20 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 40 brokerage firms. The current ABR compares to an ABR of 1.22 a month ago based on 38 recommendations.

Of the 40 recommendations deriving the current ABR, 35 are Strong Buy and two are Buy. Strong Buy and Buy respectively account for 87.5% and 5% of all recommendations. A month ago, Strong Buy made up 84.21%, while Buy represented 7.89%.

ETFs in Focus

Nvidia earnings put focus on NVDA-heavy ETFs like VanEck Vectors Semiconductor ETF (SMH - Free Report) , AXS Esoterica NextG Economy ETF (WUGI - Free Report) , Global X Robotics & Artificial Intelligence ETF (BOTZ - Free Report) , MeetKevin Pricing Power ETF (PP - Free Report) and Pacer Data and Digital Revolution ETF (TRFK - Free Report) .


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