Shares of Nvidia (NASDAQ: NVDA) are close to new highs heading into the next earnings report on Nov. 20. Earnings season can lead to wild swings in stock prices, but one analyst believes Nvidia shares are worth buying now.
Redburn Atlantic analyst Timm Schulze-Melander initiated coverage of the stock this week with a “buy” rating. The analyst set the price target at $178, implying upside of 21% over the current share price of $147 at the time of writing.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
Despite the analyst’s call, here’s why investors should wait until after the upcoming report before deciding to buy Nvidia shares.
Nvidia is showing signs that it is still in the early phases of meeting demand for data center hardware to support artificial intelligence (AI) workloads. While its second-quarter revenue growth decelerated from the previous quarter, Nvidia still posted a year-over-year increase of 122% in total revenue, which is extraordinary for a leading semiconductor business.
Analysts are usually more accurate in modeling a company’s near-term financial performance than predicting stock price movements. The consensus analyst estimate has Nvidia’s revenue growing 125% this year before increasing 44% next year, according to Yahoo Finance. The high demand for Nvidia’s data center chips is expected to keep its profit margin firm, so analysts are also expecting the company to grow earnings 44% next year to reach $4.12 per share.
Still, I don’t see a reason to buy shares ahead of next week’s earnings release. The stock’s recent climb since the previous earnings report in August may raise the chance of another post-earnings sell-off.
Regardless of what Nvidia reports next week, the stock will still offer long-term upside from the growth in the AI chip market, which may take several more years to fully play out. By waiting until after the news, investors can avoid any negative surprises that might send the stock down after earnings.
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $896,358!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.