Nvidia (NASDAQ: NVDA) is set to announce earnings on Wednesday, May 25th, while the shares are down 50% from their all-time highs seen in November 2021, with a drop of roughly 40% year-to-date (YTD).
The last earnings reported by the company were on February 16, for Q4 and Fiscal 2022, beating analysts’ expectations. With a return on equity of 42.99% and a net margin of 36.24%, generated revenue of $7.64 billion, an increase of 52.8%, Nvidia managed to show that it is still in hyper-growth mode.
However, the prospects of higher interest rates and a slowing economy are weighing in on the shares, leaving them near their 52-week lows.
Chart and expectations
Despite the shares being down YTD, zooming out over a 5-year period the shares are up 468% compared to the S&P 500, which is up 72% over the same period.
It seems as if the shares found resistance around the $155 mark; if this is broken, more downside could be expected. Currently, the shares are below all daily Simple Moving Averages, with no significant volume increase noted in May sessions.
On Wall Street, the consensus is that of a strong buy with the majority of analysts in the buy camp. The average price predictions for the next 12 months are at $323.33, a potential upside of 77.88% from the current $181.77 price.
Supply chain issues
Computer chips are omnipresent in today’s world, and playing into this trend is Nvidia as one of the world’s leaders in the field. Yet, the supply chain issues and the semiconductor shortage can create some short-term headwinds for the company.
This headwind could be a prolonged risk going forward, as even the CEO of Intel (NASDAQ: INTC) told CNBC that the chip shortage may well extend into 2024.
With the reported annual revenue growth of 61.4% in the last earnings call, Nvidia is far above the industry median of 20.1%. Based on the industry median growth numbers, NVDA revenue can be forecasted until 2025, which will offer a better picture of segment growth the company can enjoy in the coming years.
Whether the shares are a buy will depend on the investor’s time horizon on the company. In the near term, due to headwinds like the chip shortage, supply chain issues, and inflation scare, more volatility in the share price is probable.
Yet, based on the industry growth rate, the company has solid prospects where the value of the shares could go as high as the most bullish analysts have for 2022, and that is $410 in the next three years, an upside of 126%.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.