Equities weekly forecast: Nvidia, Zoom, Target

• Nvidia Q1 earnings Wednesday May 22
• Zoom Q1 earnings Monday May 20
• Target Q1 earnings Wednesday May 22

This week, the three main US indices rose to record highs. Cooling CPI data fueled Federal Reserve rate cut expectations, lifting US stocks to record highs.

Looking ahead, the US economic calendar is relatively quiet next week. The focus will be on Fed speakers, who could provide further clues about the possible timing and scale of Fed rate cuts this year. Fed speakers at the end of last week, such as New York Fed President John Williams, warned that rates will need to stay high for longer.

Nvidia Q1 earnings preview

Nvidia is set to post Q1 earnings after the close on Wednesday, May 22. Investors will focus on growth trends, particularly in Nvidia’s data centres segment, and any updates surrounding the Blackwell platform.

Wall Street is expecting:

EPS of $5.17, up significantly from $0.82 in the same quarter a year earlier.

Revenue is expected to come in at $24.65 billion, triple the revenue seen a year earlier.

The stock has posted substantial gains this year, rising around 90% YTD, compared to the S&P’s 11% so expectations are running high. The market will want to see fundamentals that support the lofty valuations.

The data centre segment will be a key focus as NVIDIA has positioned itself as an early beneficiary of the AI boom, resulting in rapid growth in this division and record revenues. In the previous quarter, the segment posted record revenue of $18.4 billion, beating the record it had set in the prior quarter and more than five times what it was a year early. Expectations are that the data centre segment could reach a fresh record of $21.17 billion in revenue in these results.

Guidance will be key to the market reaction, and supply problems must also be addressed. Supply issues remain challenging for the chip sector and will be key to new Nvidia keeping up with lofty demand goals.

Nvidia has recovered from the April low of 756, rising to a peak of 941, just below its all-time high of 974. Strong earnings and guidance could see the share price increase to fresh ATHs.

The chart shows that Nvidia and the S&P 500 are closely correlated. The AI giant forms part of the magnificent 7, responsible for much of the index's gains over recent quarters.

Zoom Q1 earnings preview

Zoom is due to report Q1 earnings on Monday, May 20. With the pandemic well and truly behind us, investors will be watching closely to see whether success in its corporate market can support the stock. Expectations are for:

EPS $1.19 on revenue of

Results come as Zoom trades down 14% in 2024, underperforming the broader market.

Back in January, Zoom Video reported Q4 earnings and revenue that topped estimates and announced a $1 .5 billion buyback of its shares. The company had $7 billion on its balance sheet as of the start of the year, so speculation is rising that it could make a sizeable acquisition.

Attention will also be firmly on AI. Rather than increasing revenue, Zoom expects AI tools to retain and add customers. Zoom is racing to build more AI tools into its business communication platforms, with further releases expected later this year.

The key to Zoom’s outlook is its ability to morph into a broader business communications platform, particularly when up against the tough competition from Microsoft Teams.

Zoom has recovered from the late April low of 60.00, rising to current levels of 64.00, but it is still below its 200 SMA. The shares' price has been the most correlated to the S&P 500 on a monthly basis since December last year.

Target Q1 earnings preview

Target is due to report earnings on May 22, ahead of the start of trading. Expectations are for:

EPS of $2.05 on revenue of $24.5 billion.

The results come after earnings from retailer Walmart, which saw strong first-quarter numbers driven by consumers seeking value as inflation remains an issue.

Although inflation may have cooled to 3.4%, it is still high and driving a change in consumer behaviour amid lower discretionary spending, particularly among lower earners.

Target, which tends to offer a more upscale shopping experience, could underperform in the current environment amid reduced discretionary income. That said, low inventory levels and lower supply chain and freight costs could support margins.

Target rose to a high of 180 in early April before easing lower to current levels around 160. While the share price traded in close correlation to the S&P500 across the first quarter, the 30-day correlation has fallen to 0, its lowest level since September last year. The share price is not benefiting from the run to record highs on the US index.

Technically, the first hurdle to clear on the upside is 164, for a rise towards 170.00. Sellers could look for a break below 155.00 for a deeper selloff.