Nvidia Set for Impressive Q4 On Strong Demand and Product Pipeline Signal: Analyst

Truist analyst William Stein reiterated a Buy rating on Nvidia Corp NVDA with a price target of $691.

Expectations are high for Nvidia’s fourth-quarter results for 2023, which will be out on February 21, 2024. 

Stein noted that investors anticipate Nvidia surpassing its performance, continuing to exceed revenue and EPS expectations over the last three quarters. 

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The company has consistently outperformed, with revenue beating by an average of 14% and EPS by 24%, and provided guidance significantly above consensus. Since its last earnings in November 2023, Nvidia’s stock has surged by 39%, vastly outperforming the S&P’s 10% gains, the analyst flagged. 

Analysts, with caution, forecast a 10-15% sales beat and a 15-20% EPS beat over guidance.

Nvidia has guided for $20 billion in sales and $4.47 in EPS for the fourth quarter of 2024. 

Stein’s insights from industry contacts suggest a strong demand in Nvidia’s supply chain, indicating a potential upside in the company’s performance and guidance. 

Despite projecting rapid revenue growth of 237% year-over-year for the fourth quarter, the exact magnitude of Nvidia’s beat remains uncertain due to factors like ASPs and product mix.

Despite the potential for cyclicality in the industry, where stretched lead times can lead to double ordering and eventually to a surplus inventory that impacts supplier revenue, Nvidia remains well-positioned for growth, as per Stein. 

The company’s product pipeline, including the Grace CPU and H200 GPU, supports a bullish outlook. 

Furthermore, the shift in data center spending from x86 to GPU accelerates Nvidia’s market dominance, supported by its culture of innovation and substantial investments in software and services.

The analyst said that valuation concerns are mitigated by Nvidia’s performance, trading at 29 times the CY25 EPS, which is within its historical P/E range. 

The tangible demand for AI, underscored by Nvidia’s significant sales in AI-related products and services and a diverse range of applications from e-commerce to healthcare, underscores the solid market position. 

The upcoming GPU Technology Conference, with CEO Jensen Huang’s keynote attracting enough attendees to necessitate a venue change, further highlights the depth of interest in Nvidia’s offerings and its prospects for sustained growth.

Stein expects Nvidia to deliver and guide for upside, likely exceeding revenue and EPS consensus of $20.395 billion and $4.59 for the fourth quarter and $22.2 billion and $5.02 for the first quarter.

Price Actions: NVDA shares traded lower by 3.43% at $670.55 on the last check Wednesday.

Nvidia AI chips. Photo via Shutterstock