Nvidia (NASDAQ:NVDA) will announce its latest quarterly results tomorrow, Feb. 21, so it may be time to reassess our NVDA stock analysis. If you’ve read my past coverage of Nvidia, you know full well I have been very bullish about future prospects for the company’s shares. However, even I’ll concede that there’s something behind the impression that NVDA could fall following earnings.
Still, even if this happens, don’t assume that it will mean the beginning of the end for the Nvidia bull case. With this, read on, as I explain why.
Nvidia Stock Earnings Preview
Since Nvidia’s last quarterly earnings release back in November, expectations have been rising that this early-mover in generative AI chips will continue to crush it in operating performance. In the past 90 days, 38 out of 38 analysts tracked by Seeking Alpha have raised their quarterly earnings forecasts.
NVDA has of course also continued to climb sharply during this time frame, surging from under $500 per share, to over $725 per share today. Despite investors bidding up Nvidia, some NVDA stock analysis predicts a reversal after the latest numbers and guidance are released.
Why? The reasons are twofold. First, with the stock running so hot lately, irrespective of whether the results are good, bad, or mixed, the market could use this event as an excuse to sell/take profit. Second, there’s something else that could lead to the next cooldown in NVDA investor enthusiasm.
That would be the prospect of competition really starting to reduce Nvidia’s undisputed dominance in the AI chips space, as detailed in a recent Barron’s article. Competition could reduce Nvidia’s AI chip margins, as well as AI chip sales growth.
Why it’s Definitely Not Time to Hit the Brakes
So, with the latest NVDA stock analysis strongly suggesting a pullback ahead, does this mean you need to sell an existing NVDA position, or avoid the stock completely if you’ve yet to buy? Not so fast.
For starters, while NVDA may sink post-earnings irrespective of the results themselves, I wouldn’t bank on the company reporting horrendous results for the preceding quarter. As I’ve argued recently, AI chip demand remains off the charts. Investors may decide to “sell on the news” of another blockbuster quarter, but the en masse taking of profit will at worst likely only mean a moderate pullback for shares.
By “moderate,” I mean a move back between $600 and $700 per share, not back to sub-$500 per share prices. Hence, it’s definitely not time to hit the brakes. For existing shareholders, such a pullback will seem like near-term market noise in hindsight.
For those choosing to buy on such weakness, in hindsight your decision to seize the opportunity could prove to be a shrewd move. At least, based on a recent analyst research note on NVDA. This research note lays out a path for shares to quickly climb to four-digit price levels.
NVDA Stock Analysis: Stay Long Heading into Earnings
Last week, analysts at Loop Capital issued a “buy” rating, and a $1,200 per share price target, for NVDA. Considering rising competition and the stock’s already-high valuation at present (58.6 times forward earnings), such a forecast may seem absurd.
Dive into Loop’s NVDA stock analysis, however, and it seems less pie-in-the-sky. In coming up with its target (65% above current price levels), analysts at Loop argue that, even as new competition is emerging, Nvidia will maintain its current level of dominance until at least 2025.
This could lead to earnings next calendar year ($40 per share) that are well above current analyst consensus. While not a guarantee, consider Loop’s bullish take food for thought, and a reason to stay long, as shares potentially encounter their next round of turbulence.
NVDA stock earns an A rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.