Nvidia has been awarded the flagship status of companies leading the artificial intelligence revolution, and all eyes turn to fourth-quarter earnings after the bell Wednesday. This is arguably the most important earnings report for technology stocks this quarter. The expectations are massive compared to the same quarter last year â and even compared to last quarter’s earnings. The massive gains in price reflect this historic growth and the question is will the chart continue its rally following earnings? The stock is reaching technical overbought status, and as a NVDA shareholder I do have concerns and will outline a level that should hold during this pullback â or I will look to protect or reduce our holdings. On Jan. 9 , I wrote about NVDA breaking through the 2023 resistance zone of $500 with targets of $650 in the first half of this year, and $775 in all of 2024. The recent highs of $746 surprised even this bull, falling just short of our target in just over six weeks. Are we moving into an environment where the expectations are fully baked into the cake? Expectations are for earnings of $4.59 per share vs 88 cents in Q4 of ’23 and $4.02 in Q3 of ’24. It’s simply amazing. Looking at analyst expectations for 2025 of $21.36 per share and with a current price of $690 that equates to a forward multiple of 32 times. For comparison, Eli Lilly is trading at 42 times 2025 earnings. It’s not egregiously valued, but there are some concerns going forward. Specifically, UBS put out a research note that wait times for GPU orders have come in significantly from eight-to-11 months to three-to-four months indicating that insatiable demand is starting to be satisfied. Another fundamental factor I’m watching is margins have expanded rapidly to 54.8% this year, but expectations are for that to level off to 50.50% in 2025 and 49.00% in 2026. Turning to the technicals, the weekly chart shows a convergence of 3 technical factors producing a resistance zone of $680-$750…
2024-02-21 12:42:00
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