Stock Analysis & Ideas

Is Nvidia Stock a Buy Ahead of Earnings? This Is What You Need to Know

Nvidia (NVDA) investors find themselves in uncharted territory in 2022. Despite clawing back some losses recently, the shares sit 11% into the red, and yet to fully recover from January’s bloodbath.

Investors will be hoping that when the company delivers F4Q22’s (January quarter) report – after the bell on February 16 – Nvidia can once again bring the goods.

While Susquehanna’s Christopher Rolland expects the chip giant to do so, he also thinks that as the stock has underperformed the SOX over the past few months (a rare occurrence), expectations might be lowered this time around.

“From a high level, we expect another beat-and-raise driven by continued GPU demand and a robust DC environment,” said the 5-star analyst. “However, we don’t yet know the market’s reaction to a decelerating 2022 outlook. WFH PC “hangover” also a concern, but DC should rise.”

Based on Intel DCG’s display, which boosted by strong Enterprise/Government demand, came in +9.6 pp above expectations and AMD’s “near-perfect scenario,” Rolland thinks that heading into the report the DC environment appears “constructive.” The analyst also thinks the A100 – the company’s all-powerful data center GPU – is now “ramping beyond hyperscalers and into enterprises.”

For Nvidia’s main breadwinner, Gaming, Rolland expects “another record quarter” but anticipates the growth to “plateau.” While demand remains robust, and the January quarter should get a boost from a “stronger-than-expected” holiday season, the April quarter’s tough comps will be hard to beat. As the graphics card markup has dropped to “just” ~80% premium to MSRP compared to almost 130% in mid-May, Rolland notes “modest signs of a demand slowdown vs. the ‘white hot peak’ of 2Q21.”

“Overall,” the analyst summed up, “We expect strong results and guide from NVIDIA, but note signs of a potential deceleration vs. the white-hot results of 2021’s +60% YOY growth. Interestingly, 2022 could be the year that Datacenter top-line surpasses Gaming’s, though tight and we give the edge to Gaming.”

Overall, Rolland believes this is a stock worth holding on to. The analyst rates NVDA shares a Buy, and his $360 price target suggests a solid upside potential of ~38%. (To watch Rolland’s track record, click here)

Rolland’s objective is only just above the Street’s price target of $353.26. Most analysts are backing Nvidia’s continued success; the stock’s Strong Buy consensus rating is based on 23 Buys vs. 3 Holds. (See Nvidia stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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