NVIDIA Q4 earnings preview: Where next for NVDA stock?

When will NVIDIA report Q4 earnings?

NVIDIA is scheduled to publish fourth quarter and full year earnings for the periods to January 29, 2023, after markets close on Wednesday February 22. A conference call will be held on the same day at 1400 PT (1700 ET).

NVIDIA Q4 earnings consensus

NVIDIA is expected to report a sharp 21% fall in fourth quarter revenue to $6.0 billion and a 38% drop in adjusted EPS to $0.81. 

The chipmaker is on course to deliver a tepid 0.1% rise in annual revenue to $26.95 billion and a 27% fall in annual EPS to $3.26 if it meets expectations in the final quarter.

NVIDIA Q4 earnings preview

Brokers have become bullish on NVIDIA as markets get excited about the prospects of artificial intelligence, with several having highlighted that the chipmaker will be a major beneficiary as its products help provide the huge amount of computing power needed for the new technology. However, while long-term prospects look strong, we may see some pullback in early 2023 as oversupply issues are ironed out. 

Softer demand from the gaming market and from original equipment manufacturers will drag down results, countered by continued strength in automotive and data centres – although the latter is also suffering from a severe slowdown. Data centres are NVIDIA’s bread and butter and account for the bulk of its revenue, but we can see that growth has tapered off this financial year.

(Source: Bloomberg)

Some hope AI can provide a new cushion to soften the blow from the broader downturn as major customers like Meta, Amazon and Alphabet have curtailed cloud computing expenditure as they sharpen their focus on costs. The rapid adoption of new tools like the popular AI-driven chatbot ChatGPT should lead to greater demand for NVIDIA’s chips that are required to provide the computing power, which is on another level compared to more traditional digital services. However, there are questions about how quickly any benefits will feed through to NVIDIA. 

China is also likely to be a focal point during the conference call because of the export restrictions introduced by the US government last year, which has prevented US companies from shipping advanced chips and equipment to Chinese customers. China accounts for hundreds of millions of dollars of sales each quarter so the impact is significant, although NVIDIA has tried to work around the new rules to minimise the hit.

The outlook for the second half of the new financial year looks rosier than the second as those oversupply issues linger, particularly in the gaming market. Overall revenue is expected to continue declining in the first and second quarters before starting to grow again in the third and significantly accelerating in the fourth thanks to easier comparatives and, hopefully, better market conditions. That may keep NVIDIA shares under pressure over the short-term before the story returns to its long-term investment case later this year.

As for earnings, these too could remain under pressure over the short-term as tough comparatives remain in play, alongside the fact costs continue to rise as revenue falls. EPS is expected to decline in the first quarter of the new financial year before returning to growth in the second as those comparatives get easier. For now, markets think NVIDIA can deliver 9.3% annual revenue growth in the 2024 financial year and a 33% jump in EPS – which will be below the pandemic-induced peaks but well above historic levels. For the first quarter, markets are hoping NVIDIA can target revenue of $6.4 billion, which would be down over 21% from the year before.

Where next for NVDA stock?

NVIDIA shares have lost some steam since hitting $230, marking a 10-month high, earlier this month. This could prove a tough ceiling to crack in the near-term considering it has tried and failed to break above here on several occasions in recent sessions, pushing the RSI into overbought territory. This also proved a firm level of resistance back in 2021. A break above here could pave the way for a larger move toward $267.

Brokers believe the rally in 2023 has been overdone considering they have an average target price of just $206.50. We may see the stock sink back toward $192 if it continues to drift lower. A move below here would bring the moving averages back into play.

Take advantage of extended hours trading

NVIDIA will release earnings after US markets close and most traders must wait until they reopen the following day before being able to trade. But by then, the news has already been digested and the instant reaction in share price has happened in after-hours trading. To react immediately, traders should take their positions in pre-and post-market sessions.

With this in mind, you can take advantage of our service that allows you to trade NVIDIA and other tech stocks using our extended hours offering.

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