Why Nvidia Stock Could Rise after Its Q4 Earnings

Nvidia (NASDAQ:NVDA) is scheduled to post its results for the fourth quarter of fiscal 2020 on Thursday after the market bell. The fourth quarter ended on January 26. Overall, Wall Street analysts expect the company to report revenues of $2.96 billion in the fourth quarter—up 34.4% YoY (year-over-year). The company will likely report non-GAAP EPS of $1.67—up 108.8%.

Today, Nvidia stock has risen 2.5% at $258.01 as of 10:00 AM ET. On February 7, the stock fell 1.04% and closed at $251.59  with a market capitalization of $154.0 billion. The stock is trading 3.1% below its 52-week high of $259.50 and 89.7% above its 52-week low of $132.60. Notably, the stock has also returned 6.9% YTD (year-to-date). In comparison, the S&P 500 Index has gained about 3.0% YTD.

Analysts’ recommendations and target prices for Nvidia

Currently 41 Wall Street analysts cover Nvidia. Among the analysts, 29 recommend a “buy,” ten recommend a “hold,” and two recommend a “sell.” Analysts’ mean target price on the stock is $251.20, which implies a 0.2% loss from the current level of $251.59. The lowest target price estimate is $140, while the highest is $301.00.

Today, RBC Capital analyst Mitch Steves kept an “outperform” rating on Nvidia stock and increased his target price to $301 from $251. According to a report from TheFly, “The analyst’s channel checks suggest both gaming and data center demand came in better than expected in the company’s January quarter, particularly when compared to Street estimates.” The report also said, “Steves says that assuming Nvidia hits his new increased estimates, the company would have a revenue run-rate similar to October of 2018 while the stock is $50 below its $300 peak. Further, Nvidia’s operating margins will improve to 40%-plus by the middle of 2020.”

Nvidia stock’s valuation

Currently, Nvidia stock is trading at 34.61x its fiscal 2021 estimated adjusted EPS of $7.27. Meanwhile, the stock is also trading at 29.19x its fiscal 2022 estimated adjusted EPS of $8.62. Analysts expect Nvidia’s earnings to rise at a CAGR of 10.7% over the next five years. Also, the company’s revenues will likely rise 19.2% YoY in fiscal 2021 and 15.1% in fiscal 2022.

Technical level

Based on the closing price on February 7, Nvidia stock was trading 1.7% above its 20-day moving average of $247.43. The stock is also trading 7.0% above its 50-day moving average of $235.09 and 17.2% above its 100-day moving average of $214.60.

Nvidia’s 14-day relative strength index score is 58. According to the score, the stock isn’t overbought or oversold. The stock’s upper, middle, and lower Bollinger Band levels are $256.27, $247.43, and $238.60, respectively. On February 7, the stock closed near its middle Bollinger Band level. The level suggests that the stock isn’t overbought or oversold.

Meanwhile, Micron, Advanced Micro Devices, and Intel have also risen YTD. They have gained 5.8%, 8.4%, and 10.3%, respectively, YTD.

Read NVIDIA: The Way It Is Meant To Be Played to learn more.