Tech stocks are taking a beating this week, and semiconductor powerhouse Nvidia is no exception. The semiconductor giant gave up around 8 percent on Monday, bringing its total one-month decline to around 20 percent, after a short recovery period. The question is, “is this entry point ahead of earnings, or a sign of more rocky roads ahead?”
Nvidia Corporation is set to report its third quarter earnings in Thursday’s post market. The stock has been a tank for investors, providing over 1000 percent gains over the last three years, and only recently hitting all-time-highs at around $292 per share. This earnings report, in an extra-sensitive time for the market, could make or break the stock in the near term, but should have little impact on Nvidia’s long-term growth.
The fact is, Nvidia has enough exposure across the semiconductor market to stay afloat and continue to deliver for investors. The long-term growth for the company is nearly a sure thing. The stock has exposure in gaming, autonomous vehicles, datacenters, and artificial intelligence, and is well positioned to dominate the emerging sectors. With its lucrative future almost set in stone, the main question is on the near term. For investors looking to get into Nvidia in the perfect window, the two key options are whether this is the time, or if they should wait until after Thursday’s earnings for another slump.
Nvidia remains a darling among institutional investors and analysts, with mostly a Buy rating, and a consensus price target of $290.32. Evercore Analyst C.J. Muse came out as particularly bullish on the stock in late September, raising his price target to $400 and reaffirming his Buy rating for the stock.
“NVDA continues to make a compelling case for long-term sustainable growth across all segments with a specific focus on large industry verticals including Gaming, HPC, Pro Visualization, Transport, Healthcare, and Autonomous Machines,” Muse wrote. “Very importantly, we view Nvidia as being on the cusp of a tipping point in the company becoming the AI standard platform.”
The bears on Nvidia are looking at competitor Advanced Micro Devices, who reported Q3 earnings last month, missing on revenue and lowering guidance for Q3. With Nvidia currently trading at around 31x earnings, any slump in future growth outlook could send the stock tumbling.
The difference between the two stocks is Nvidia’s overall exposure to large-scale enterprise revenue streams, while AMD is more prone to trends in the consumer markets, citing slumps in cryptocurrency mining and gaming as key reasons for its lower-than-expected growth in Q4. According to company CFO Colette Kress, Nvidia has seen a similar slump from the cryptocurrency boom dying down. However, it’s an important note that crytocurrency sales were a minuscule portion of Nvidia’s $6.91 billion in revenue for 2017.
Either way, investors who are willing to take on some risk should buy in this current dip before earnings. It will either make for a quick payoff, following a soaring share price post-earnings, or a long-term hold that is sure to provide overall growth on their position.