Get Premium Data for Cyber Monday: Up to 55% Off InvestingProCLAIM SALE

Expect strong Nvidia results to keep the stock moving higher: UBS

Published 12-11-2024, 02:32 pm
© Reuters.
GOOGL
-
AMZN
-
NVDA
-
GOOG
-

Investing.com -- UBS analysts said they remain bullish ahead of Nvidia’s earnings report next week, expecting the AI darling to deliver strong results and guidance that could keep the stock moving higher.

Accordingly, the investment bank has raised its price target from $150 to $185, implying more than 27% upside from current levels.

UBS forecasts Nvidia (NASDAQ:NVDA)'s third fiscal quarter (October) revenue to be in the range of approximately $34.5 billion to $35 billion, with fourth fiscal quarter (January) guidance around $37 billion, potentially rising to $39 billion once Nvidia reports its fourth-quarter results in early 2025.

Analysts led by Timothy Arcuri note that the “biggest blind spot” in its forecasts is the gross margins, which they expect to decrease by about 200 basis points in the first fiscal quarter to the 73% range. However, “anything below this could be viewed negatively by investors,” they added.

In broader terms, analysts point to a favorable capital expenditure (capex) environment among hyperscalers, with increasing expenditures likely to narrow the gap between their capex and Nvidia's incremental data center revenue for the calendar year 2025.

UBS also highlights sovereign AI as a significant demand driver for Nvidia's products, noting that spending by large sovereign states, especially in the Middle East, could rival that of major US hyperscalers in the coming years.

Although the return on all of this investment remains a key debate among investors, analysts point out several “encouraging signs.” These include Google (NASDAQ:GOOGL)'s revenue growth in search and cloud sectors, Amazon (NASDAQ:AMZN)'s cost savings through the use of generative AI, and the rapid expansion of AI use cases in both public and private sectors.

In their model, UBS has adjusted their revenue estimate for Nvidia's fourth fiscal quarter from approximately $37.3 billion to around $38.9 billion. This includes the expectation of mid-teens quarter-over-quarter growth in the Data Center segment to nearly $35 billion.

The firm projects the Data Center's revenue growth will continue into the first fiscal quarter of 2026, exceeding $40 billion, driven by the ramp-up of the new Blackwell product.

It also reflected on recent media reports regarding potential US restrictions on high bandwidth memory (HBM) shipments to China, stating that it sees a low risk of Nvidia's H20 product being affected by such bans. UBS's team believes any restrictions would likely be implemented “at the discrete module level.”

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.