Some Wall Street analysts are bracing for a pullback in Nvidia shares after the chipmaker reports fiscal fourth quarter results after the bell Wednesday. “We reiterate Buy/top pick ahead of NVDA Feb-21 earnings but won’t be surprised to see a notable but brief pullback after the recent parabolic run-up in the stock,” wrote Bank of America analyst Vivek Arya in a recent note. To be sure, analysts view Nvidia favorably over the long haul, but have cast doubt over the near-term setup as the stock rises and its valuation ticks up again. Nvidia shares slid more than 4% during Tuesday’s session, but they have surged 40% in 2024. HSBC analyst Frank Lee said in a Monday note that “earnings upside momentum appears to be peaking” in Nvidia and that the company’s beat-and-raise pattern will likely reach its pinnacle during this print. “We believe overall market expectations have risen significantly as consensus earnings are now approaching our forecast,” he wrote. “Hence, we see limited room for further earnings upside in 2024 relative to the sales and earnings surprise that we saw in 2023.” Even if Nvidia tops estimates, some on Wall Street anticipate a post-earnings decline akin to what’s occurred during previous prints. Barclays analyst Tom O’Malley, who holds a neutral rating on the stock, said he expects another “sell the news reaction,” while Morgan Stanley’s Joseph Moore noted that recent investor conversations have revealed concerns about short-term expectations appearing too high. These potential obstacles, however, haven’t stopped analysts from retaining a bullish stance, with 93% holding a buy or overweight rating on shares, according to FactSet. The average price target also implies 8% upside from Tuesday’s close. In fact, several analysts have amped up bets on the chipmaker in recent weeks, with Loop Capital hiking its price target to a Wall Street high $1,200 as the “front end” of a multi-year graphics processing units cycle trudges on. Rosenblatt boosted its objective to $1,100. Raymond James analyst Srini Pajjuri urged investors to use a post-results pullback as an opportunity to scoop up shares, and lifted his price target to $850. NVDA YTD mountain Nvidia shares since the start of the year Regardless of the stock’s reaction, Wall Street broadly expects the company to surpass expectations on the top and bottom lines and lift guidance as it acts on exploding demand for artificial intelligence tools. For several quarters now the company has blown past estimates in this segment as firms snatch up chips to power their large language models, with Barclays’ O’Malley referring to data center GPU numbers as the “key metric that matters in the print.” Demand for these products, and signs of an extension in lead times, could power significant upside to shipments and revenues and enable the company to beat data center estimates by $2.5 billion to $3 billion, according to UBS analyst Timothy Arcuri. But how the chipmaker performs could also have some implications for stocks overall, and serve as major test for a market steadily powering higher despite persistent inflation and uncertainty surround the Federal Reserve’s rate-cutting path. “Risks to Goldilocks, sticky inflation, elevated valuations, extended positioning, rising volatility, or simply an adverse NVDA price reaction to expected earnings beat from The Stock That Is The Market; NVDA could alter the FOMO momentum,” said Evercore ISI’s Julian Emanuel in a recent note. — CNBC’s Michael Bloom contributed reporting
