Why Nvidia Stock Could Rise on Q3 Earnings Beat

Nvidia (NVDA) stock is trending upward in today’s pre-market session. The stock was up about 0.6% at 6:25 AM ET. On Thursday, the company announced its earnings for the third quarter of fiscal 2020 after the market close. In the third quarter, the company reported revenues of $3.0 billion—down 5.2% YoY (year-over-year). Nvidia reported an adjusted EPS of $1.78—down 3.3% YoY. Notably, Wall Street analysts expected the company to report an adjusted EPS of $1.57 on total revenues of $2.9 billion.

Nvidia’s Q3 earnings results

The revenues from Nvidia’s data center segment rose 10.8% sequentially but fell 8.3% YoY to $726 million. However, the data center segment’s revenues missed analysts’ consensus estimate of $754.2 million. The revenues from the gaming segment rose 26.4% sequentially but fell 6.0% YoY to $1.66 billion. The gaming segment’s revenues beat analysts’ consensus estimate of $1.54 billion.

In the fourth quarter, Nvidia expects revenues of $2.95 billion plus or minus 2%. In comparison, analysts expect the company to see sales of $3.03 billion. Nvidia expects its data center segment to report strong sequential growth. The outlook doesn’t include the impact of the $6.9 billion proposed acquisition of Mellanox.

According to a CNBC report on Thursday, “the company would achieve positive follow-through in its Data Center segment in the fiscal fourth quarter, although the Gaming business would have a tougher sequential revenue comparison, partly because of negative seasonality effects from Nintendo Switch console sales.”

Analysts increase Nvidia’s target price

Many analysts raised their target price for Nvidia stock after the third-quarter earnings results.

  • Jefferies increased its target price from $210 to $250.
  • J.P. Morgan increased its target price from $200 to $237.
  • Piper Jaffray increased its target price from $200 to $230.
  • Benchmark increased its target price from $210 to $240.
  • Mizuho increased its target price from $185 to $230.
  • Suntrust Robinson increased its target price from $216 to $240.
  • Raymond James increased its target price from $180 to $240.
  • Cowen increased its target price from $195 to $240.
  • Craig-Hallum increased its target price from $200 to $255.
  • Nomura Instinet increased its target price from $147 to $200.

Nvidia is covered by 40 Wall Street analysts. Among the analysts, 28 recommend a “buy,” nine recommend a “hold,” and three recommend a “sell.” Analysts’ mean target price on the stock is $214.68, which implies a 2.3% gain from the current level of $209.79. The lowest target price estimate is $120, while the highest is $312.24.

Peer comparison

In the third quarter, Advanced Micro Devices (AMD) reported revenues of $1.80 billion—up 9% YoY. The company reported an EPS of $0.18—up 38.5% YoY. Notably, analysts expected the company to report an adjusted EPS of $0.18 on total revenues of $1.81 billion.

In the third quarter, Intel (INTC) reported revenues of $19.2 billion—up 0.1% YoY. The company reported an EPS of $1.42—up 1.4% YoY. Analysts expected the company to report an adjusted EPS of $1.24 on total revenues of $18.0 billion.

Stock Performance

Nvidia stock has risen close to 4.4% since the beginning of November. On Thursday, the stock closed at $209.79, which was 0.6% higher than its previous closing price, 1.0% lower than its 52-week high of $211.86, and 68.6% higher than its 52-week low of $124.46. The company’s market cap is $127.8 billion.

Based on Nvidia’s closing price on Thursday, it has reported returns of 0.7% in the last five trading days, 12.5% in the trailing one-month period, and 6.4% in the trailing 12-month period. The company has gained 57.2% since the beginning of 2019.

On Thursday, Nvidia closed 3.0% above its 20-day moving average of $203.75 and 10.4% above its 50-day moving average of $190.01. The company was also trading 18.4% above its 100-day moving average of $177.24.

Nvidia’s 14-day MACD is 2.44, which denotes an upward trading pattern. The company’s 14-day relative strength index score of 67 suggests that the stock is approaching the overbought level.

Intel and Advanced Micro Devices have gained 23.2% and 107.8%, respectively, year-to-date.

Read Why Nvidia Stock Could Rise after Q3 Earnings to learn more.