Why investors should be upset about expectations before earnings

In the last two years, Nvidia (NVDA) “Beat and Raise” has created the habit of providing earnings reports. With the financial report of chip giant F1Q21 closing on Wednesday, May 25, do investors want another treat? Not according to Christopher Rowland of Susquehanna.

“Unlike recent quarters,” the 5-star analyst said, “we believe that any significant beats and growth could be limited by the gaming headwind.”

So, are these headwinds hindering Nvidia’s biggest earners?

For one, retail premiums on top of MSRP (manufacturer’s recommended retail price) for NVIDIA cards have been “drastically reduced”. By mid-2021, they were at the top of + 130% but have now dropped to + 78% in January before falling further to 23%. At the same time, there has been a “significant recovery” with retailers now having all the big card families on the shelves.

According to Roland, the main reason behind these changes is the “reopening” that is moving towards print, presenting a “potential mid-term descriptive risk”.

In addition, analysts have previously stressed the risk of 2H22 becoming a “WFH PC hangover” and Roland believes that Intel / AMD’s recent comment strengthens its case.

That said, gaming headwinds have an imbalance Although gaming has always led the way in Nvidia, the data center continues to grow as a revenue driver. Indeed, Roland expects a “strong result” for the data center, believing that it is now “bigger than gaming.”

“The healthy underlying demand for NVIDIA products is being driven by hyperscale cloud computing, AI workloads, natural language processing, deeply recommended models and vertical enterprise products,” Roland explained.

While Roland doesn’t think the cards have another “over-the-top beat and boost”, he also notes that the stock’s unusually low performance – year-to-date – is about 17% behind the SOX – now a bar to enforce the “penalty”. “There is. “

Since then, Roland has maintained a positive (i.e., buy) rating on the NVDA with a price target of $ 280. If correct, investors can line their pockets with a 67% profit. (To view Roland’s track record, Click here)

Overall, of the 26 analysts’ reviews on file, 5 are on the sidelines but the rest are positive, which makes the consensus view on this stock a strong buy. The forecast calls for a one-year profit of% 84% considering the average price target watch at $ 308.26. (See Nvidia Stock Forecast in Tiprank)

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Disclaimer: The views expressed in this article are those of the featured analyst only. Content is intended for informational purposes only. It is very important to do your own analysis before making any investment.

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