Stock Analysis & Ideas

Nvidia Earnings: A Beat and Raise Is Coming, Says Wells Fargo

Despite recent gains, heading into today’s January quarter (F4Q22) results, Nvidia (NVDA) stock finds itself in almost unfamiliar negative territory –shares are down 11% year-to-date.

However, Wells Fargo’s Aaron Rakers puts the weak performance as “market/geopolitical driven rather than a change in company-specific investor sentiment in NVDA as an upside momentum story.”

In fact, Rakers sees the setup as skewed in Nvidia’s favor, anticipating the company to provide investors with “another beat-and-raise quarter and further confidence in the company’s continually deepening platform / growth narrative.”

Overall, Rakers’ estimates are just a touch below consensus forecasts. The analyst has FQ4 revenue and EPS at $7.405 billion and $1.22, respectively, while the Street is calling for $7.42 billion and $1.23.

So, what should investors look out for in the print?

Obviously, says Rakers, a key focal point will be “growth momentum” in the data center market. The 5-star analyst expects the outlook to “continue to support” his anticipation of a 25%-30% + data center CAGR moving forward. Other “growth drivers” through fiscal 2023 could be provided by the Enterprise AI Software suite, AI Launchpad, and the “materializing ramp” of the BlueField-2 DPUs, but it remains to be seen whether the company’s outlook factors these in.

In Gaming, Rakers says the “longevity” of NVDA’s Ampere GeForce RTX 3xxx-series upgrade cycle is “underappreciated.” Here, as Ethereum crypto mining shifts to Proof-of-Stake (PoS) during the year’s latter half, investors will be evaluating the “potential impact of declining demand.”

Given NVIDIA’s notably expanded purchase commitments, and in what is still a “constrained supply environment,” Rakers will be looking for management’s take on meeting present “demand dynamics” over the coming quarters.

Elsewhere, following early-November’s introduction of Omniverse Enterprise, Nvidia’s new viz focused collaboration platform, Rakers says it is still difficult to quantify the revenue opportunity here. The analyst’s initial expectation is of a $10 billion “incremental addressable opportunity,” but expects the “build-out” of the Omniverse ecosystem will also be a focal point on the earnings call.

All in all, Rakers rates NVDA shares an Overweight (i.e. Buy) along with a $370 price target. Investors could be sitting on returns of 40%, should his thesis bear fruit over the next 12 months. (To watch Rakers’ track record, click here)

Most analysts agree. NVDA stock boasts a Strong Buy consensus rating with 23 Buys overwhelming 3 Holds. At $355.68, the average price target implies shares will be adding ~35% of muscle in the year ahead. (See NVDA 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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