Nvidia Stock Skyrockets on Strong Earnings and AI-Fueled “Guidance For the Ages” (VIDEO)

Last Updated: 8.6.2023 18:56

After Releasing Strong Q1 Earnings and Issuing an AI-Fueled Blowout Q2 Forecast, Nvidia Has Wall Street Buzzing

Let’s look at what top Wall Street analysts are saying about NVDA stock, along with their newly updated ratings and price targets.

Shares of Nvidia (NASDAQ: NVDA) stock surged over 24% today after the company released its first quarter 2024 earnings, which say the company reported revenue for the quarter of $7.19 billion, up 19% compared to last quarter and down 13% from a year ago. The company’s data center revenue reached a record $4.28 billion. Nvidia also reported that its GAAP earnings per diluted share for the quarter came in at $0.82, up 44% and 28% compared to last quarter and last year, respectively.

During Q1, Nvidia paid its shareholders $99 million in cash dividends. The company is slated to pay its next quarterly cash dividend of $0.04 per share on June 30, 2023, to all shareholders of record on June 8, 2023.

Nvidia founder and CEO Jensen Huang, via press release, commented:

“The computer industry is going through two simultaneous transitions — accelerated computing and generative AI. A trillion dollars of installed global data center infrastructure will transition from general-purpose to accelerated computing as companies race to apply generative AI into every product, service and business process. Our entire data center family of products — H100, Grace CPU, Grace Hopper Superchip, NVLink, Quantum 400 InfiniBand and BlueField-3 DPU — is in production. We are significantly increasing our supply to meet surging demand for them.”

Q2 2024 “Guidance For the Ages”

Despite its strong Q1 numbers, it was Nvidia’s Q2 2024 forecast, referred to by some as “guidance for the ages,” that has all of Wall Street buzzing.

Here’s a breakdown of Nvidia’s Q2 2024 financial outlook:

• Revenue is projected to be $11 billion, plus or minus 2%, blowing away the Wall Street estimate of $7.2 billion.
• GAAP and non-GAAP gross margins are expected to be 68.6% and 70.0%, respectively, plus or minus 50 basis points.
• GAAP and non-GAAP operating expenses are expected to be approximately $2.71 billion and $1.90 billion, respectively.
• GAAP and non-GAAP other income and expenses are expected to be an income of approximately $90 million, excluding gains and losses from non-affiliated investments.
• GAAP and non-GAAP tax rates are expected to be 14.0%, plus or minus 1%, excluding any discrete items.

On the earnings conference call, Nvidia CEO Jensen Huang told analysts that the reason behind the company’s strong Q2 forecast is a result of a fundamental shift to accelerated computing, which Huang explained places Nvidia’s chips that power generative AI in high demand.

Huang explained further, stating:

“We’re seeing incredible orders to retool the world’s data centers. And so I think you’re seeing the beginning of, call it, a 10-year transition to basically recycle or reclaim the world’s data centers and build it out as accelerated computing. You’ll have a pretty dramatic shift in the spend of a data center from traditional computing and to accelerate computing with SmartNICs, smart switches, of course, GPUs, and the workload is going to be predominantly generative AI.”

Source: Yahoo Finance YouTube

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Analysts React – Updated Ratings and Price Targets

Let’s take a look at how a handful of top Wall Street analysts reacted to the Nvidia Q2 2024 guidance, along with their newly updated ratings and price targets on NVDA stock.

Tristan Gerra | Baird

• Rating: Outperform, upgraded from Hold
• Price Target: $475, up from $300
• Comments: “We raised our estimates above consensus and added a Fresh Pick designation to Nvidia on March 20, reflecting our channel feedback about strong H100 orders notably related to ChatGPT emerging in March, but we failed to upgrade at that time. As AI-related order momentum continues into the second half, annualized earnings of $10 are at reach within 2-3 quarters in our view, reflected in the valuation post-earnings. Our raised next two-year EPS forecast assumes continued AI-related momentum driven by two secular growth trends: continued adoption rate for parallel processing-based acceleration in data centers and the emergence of AI models notably related to ChatGPT and LLMs [large language models], all of which require GPUs.”

Atif Malik | Citi

• Rating: Buy
• Price Target: $420, up from $353
• Comments: “While we had raised our target price and estimates into the earnings, Generative AI upside was bigger than we expected. Nvidia expects data center sales to roughly double in the July quarter, driven by Gen AI demand from CSPs, consumer internet companies, and accelerated computing in enterprises. Nvidia estimates only ~4% of the $1 trillion data center CPU installed base over the last four years has been GPU accelerated, implying AI adoption remains in early innings.”

Ruben Roy | Stifel

• Rating: Hold
• Price Target: $370, up from $300
• Comments: “Nvidia’s recent momentum continued as first-quarter results beat consensus expectations, and the company’s second-quarter revenue outlook was significantly above high expectations. Nvidia remains in the sweet spot of AI-infrastructure wallet share as build-outs of accelerated computing networks continue. As the company’s data center numbers grow, questions on the near-term supply environment are likely to continue. For now, while not providing explicit longer-term guidance, Nvidia management noted that data center-related demand visibility has increased and that the company has procured substantially higher supply for the second half of the year. We raise our estimates and target price and continue to view Nvidia as the best positioned near-term beneficiary of CSP capex spending trends.”

Ross Seymore | Deutsche Bank

• Rating: Hold
• Price Target: $390, up from $170
• Comments: “After such a massive beat/raise/share price pop, the key question going forward is sustainability. We believe the drivers of it appear to be much more secular than cyclical (AI, DC accelerators crowding out CPUs, etc.), and Nvidia’s lead in this market remains sizable, but we remain uncertain as to the pace of such growth post-second quarter and if/when the next DC digestion period may occur. Consequently, we are raising our 2024 revenue/EPS by a significant +37%/+70%, with our price target rising to $390 (based upon a consistent 40x P/E multiple). With Nvidia’s unique AI market leadership and the scarcity of alternative plays, we see little that could diminish investor optimism and recommend continuing to enjoy the ride.”

Shares of Nvidia closed trading today at $379.80 per share, up +24.37% on the day. YTD, NVDA stock is up +165.32%.

Learn more about Nvidia: Website | Investor Deck | NVDA Chart

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