One analyst called Nvidia’s (NVDA) second-quarter earnings report released on Wednesday “the most important tech company performance in years.” It’s easy to see why. The artificial intelligence giant has already posted four consecutive quarters of triple-digit profit and sales growth. Wall Street is expecting a fifth consecutive quarter of strong performance when the IBD Leaderboard member reports earnings this week. Nvidia shares are looking to break out to all-time highs but are also clinging to support at their 50-day line.
↑
X
How Nvidia is bringing AI to healthcare
Nvidia’s report and the market’s reaction will certainly have an impact on the other members of the Magnificent Seven: Meta Platforms (META) and Apple (AAPL) are both approaching buy points, while Tesla (TSLA), Alphabet (GOOGL), Microsoft (MSFT) and Amazon.com (AMZN) remain below their 10-week moving averages.
Test 1: Focus on Nvidia’s earnings
According to IBD Stock Checkup, Nvidia has achieved an average of 500% revenue growth over the past three quarters, while sales growth during the same period ranged from 206% to 265%.
The company reported on May 22 that first-quarter revenue rose 262% to $26 billion. Profit rose 455% to 61 cents per share.
When Nvidia reports earnings after the close on Wednesday, analysts expect the AI leader’s revenue to rise 113% to $28.7 billion. On the earnings side, Wall Street expects earnings to rise 139% to 65 cents a share. For the full year, analysts are expecting earnings to rise 109% to $2.72 a share.
AI data center products and services now account for the majority of Nvidia’s current total revenue, and CEO Jensen Huang has said that accelerated computing and generative AI have both reached a “tipping point,” with AI-related revenues in industry verticals such as finance and healthcare growing to billion-dollar levels.
Test 2: Can Nvidia stock sustain its 1,202% gain?
The aforementioned impressive growth has kept Nvidia in the spotlight for a long time, and that growth has propelled Nvidia shares up a whopping 1,202% from their October 2022 lows to their all-time highs hit in June.
Investors should be aware that buying stocks right before an earnings release can be risky, but Nvidia is holding onto a cup pattern with a buy point at 140.76. The stock is also looking to enter an earlier trendline.
Earlier this month, Nvidia’s stock showed its ability to withstand a hit and keep climbing. After shaking off a sell-off that dropped it below its 10-week line in July, Nvidia has since rallied above that threshold. The stock fell more than 2% on Monday but closed above its 50-day line.
The relative strength line, which stalled out in July, has turned upward but is still below its 52-week high.
Investors should also keep in mind that Nvidia’s current setup is a fourth-stage basis, and such a late-stage pattern carries more risk, especially after such a long and impressive rally.
Test 3: Managing expectations and risks
Nvidia has been and will likely remain one of the top AI stocks to watch for a long time, and the results the company reports on Wednesday are sure to surprise and delight Wall Street.
But investing wisely in stocks requires knowledge of how to manage risk and the discipline to apply sound rules about how to buy and when to sell stocks.
Nvidia’s stock has seen impressive gains in recent years, but after a period of uncertainty last month and a recovery above its 10-week mark, eight “secrets” about when to sell the stock have emerged.
NVIDIA has formed multiple bases since the First Stage Cup in December 2022-January 2023, providing multiple buying opportunities. The company is set to release its highly-anticipated earnings report this week, so investors should have a game plan ready in advance.
For investors who already own Nvidia stock, will they buy more shares if the stock price soars? And how many?
Investors looking to initiate new positions should keep in mind that Nvidia has already made a big move, and any breakout will likely come from a late-stage base.
So while all eyes are on Nvidia, investors should also be paying attention to how it manages its own risks and potential opportunities.
You may also like:
Microsoft, NVIDIA Shunned: Meet Wall Street’s New Big Daddy.
Nvidia’s earnings report described as “the most significant tech earnings in years”
Step aside Tesla. This stock needs your Mag 7 card.
Generate new stock ideas with IBD Stock Screener
Identify your base and buy points with this pattern recognition tool
