Nvidia(NASDAQ: NVDA) has proven itself over time as a successful investment, with an increase of over 2,700% in the last five years. And the momentum has strengthened as this top chip designer reported triple-digit earnings growth quarter after quarter. This is thanks to the dominance Nvidia has built in the artificial intelligence (AI) chip market, with the company now holding a share of around 80%.
And Nvidia is winning not just in AI chips, but in the entire AI market, which is expected to grow from $200 billion today to $1 trillion by the end of the decade. This is because Nvidia offers a wide range of products and services, suitable for any company developing an AI platform. During a BG2 podcast earlier this month, CEO Jensen Huang called the company the “onramp” to the AI world.
Next up for Nvidia is the company’s third-quarter earnings report, scheduled for November 20. Investors will focus on earnings numbers, Nvidia’s ability to meet its gross margin target and comments on a major upcoming product launch. Should You Buy Nvidia Stock Before This Important Report? Let’s look at what history has to say.
First, let’s take a look at what investors expect from the tech giant. Nvidia has forecast double-digit revenue growth, slower than recent triple-digit growth. But it’s important to keep in mind that the comparison quarters are getting tougher, with Nvidia’s latest third quarter already bringing in more revenue than the company achieved in a full year just a few years ago – in fiscal 2021. Double-digit growth so should happen. can still be considered extremely strong performances at this stage of the Nvidia story.
The company, which reported a gross margin of 75% last quarter, aims to maintain margin levels above 70%. Gross margin for the third quarter and full year is forecast to be around 70%. This level of profitability, along with double-digit revenue growth, should boost investor confidence in this top technology player.
Finally, investors will look forward to commentary on the upcoming launch of Nvidia’s Blackwell architecture and its best-performing chip ever. So far so good, with Nvidia’s Huang saying on the last earnings call that demand was outpacing supply and should continue to do so through next year.
Now let’s see how Nvidia stock might react to its November 20 earnings report. And one way to do that is to look at historical trends for Nvidia following these reports. Looking back over the past eight quarters, Nvidia shares rose six times in the one-month period following the report. And four of those times, the stock posted double-digit gains.
It’s important to note that stocks don’t always follow historical trends, so while these findings suggest that Nvidia could rise if the company delivers positive news, this isn’t guaranteed. It’s impossible to predict short-term stock performance because stocks and the market are known to surprise us.
Now let’s get back to our question. Should you buy Nvidia before November 20? Historical trends give us reason to be optimistic about near-term profits, but more importantly, investors should consider Nvidia’s long-term performance potential.
The trend of revenue growth and solid gross margin could continue well into the future, and here’s why. Nvidia is already a leader, with customers willing to wait to get their hands on the latest product, and the company has pledged to innovate annually. Additionally, Nvidia will gain efficiencies as the company moves past the early production and launch phases for Blackwell and the processes become more routine. This should help Nvidia maintain its wide margins.
All this means that if you buy before November 20 and benefit from an increase: fantastic. But if the price stagnates or falls after the report, or if you buy Nvidia at a later date and miss out on a post-earnings rally, don’t worry. Short-term moves won’t have much impact on your returns over time. So Nvidia is making a great purchase for investors before or after November 20 because the company has everything it takes to excel in the long term.
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Adria Cimino has no positions in the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Should you buy Nvidia before November 20? This is what history says. was originally published by The Motley Fool