Wall Street darling Nvidia (NVDA) -) is set to report its fiscal quarterly results on August 23. Investors will likely watch the news closely, given that Nvidia surprisingly soared after its last earnings conference call.
Last time, those lucky enough to own Nvidia before its post-EPS stunner were handsomely rewarded, including long-time analyst Stephen Guilfoyle. Guilfoyle, who began his career on the stock exchange floor in the 1980s, has owned Nvidia all year.
Guilfoyle recently updated Real Money Pro readers on how he's trading Nvidia stock ahead of its highly anticipated earnings release. Here's what he had to say about what could happen next to Nvidia's stock.
Nvidia is riding an artificial intelligence boom
Nvidia may be best known for making graphic processors for video gaming, but its leadership in that arena isn't behind its meteoric performance this year.
Instead, Nvidia's surging share price is because of spending growth on artificial intelligence.
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Last year's successful release of ChatGPT, a generative AI program, has led to millions embracing large language models (LLMs) to produce more meaningful insight than traditional search. As a result, companies are rushing to create their own AI solutions, increasing the need for faster, more energy-efficient chips necessary to train and operate them.
While competitors, including Advanced Micro Devices (AMD) -), are developing their own solutions, Nvidia is the leading manufacturer of those highly desirable chips. As a result, demand for its H100 graphics chips, which can cost up to $40,000 apiece, is causing revenue to surge.
How to trade Nvidia's quarterly earnings
Last quarter, the company's CEO Jensen Huang set the bar high, guiding investors to expect sales of $11.1 billion in the three months ending April 30. The forecast trounced Wall Street analysts' $7.1 billion outlook, an impressive feat given how closely analysts usually work with management on their models.
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"Wall Street had no idea up until that moment of the incredible increase in demand that the firm was seeing for not just its data center cloud capable GPUs, but for its highly elite generative AI capable GPUs," wrote Guilfoyle.
It will be hard to surprise investors that much again this time. Wall Street expects revenue of $11.1 billion and earnings of $2.08 for the quarter. However, there have been additional orders news that could allow Nvidia to guide next quarter higher.
For example, Guilfoyle points out that the Financial Times reported Saudi Arabia bought over 3,000 H100 chips, and the UAE has similarly purchased thousands of chips to support the development of its own LLM, Falcon.
The potential for orders to exceed Wall Street targets, creating another surprise in guidance, doesn't guarantee Nvidia's stock travels higher. However, Guilfoyle notes that technical analysis could also work in Nvidia's favor, given that share prices have traded within an ascending channel this year, recently bouncing off the lower line.
"Assuming - which is something that we should never do - that NVDA can hold on to that 50-day line and then take back its 21-day EMA (exponential moving average) at $440, the stock will have a real shot upon a positive earnings report coupled with positive guidance of retaking the $480 July top, which will become our pivot," writes Guilfoyle.
Guilfoyle previously took some profit off the table, but he's holding the rest of his Nvidia shares as long as shares avoid a prolonged stay below the 50-day moving average.
Until then, buying down to that level, roughly $432 as of August 15, makes sense. If earnings cause shares to surge above $480, he believes an upside target of $576 will be in play.
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