Thanksgiving is just around the corner, and NVIDIA (NVDA) shareholders certainly have a lot to be thankful for this year. Will the company’s upcoming earnings report keep the stock’s momentum going?
The computer hardware manufacturer is just one of several big tech stocks that are due to report earnings in November. It’s also going to be a big earnings month for the oil and gas industry.
Must read: The rise of NVIDIA
NVIDIA has been around for more than 30 years, but until recently, it was a fairly obscure company outside of the PC gaming and computer engineering worlds.
That’s no longer the case today, because NVIDIA’s graphics processing units (GPUs) have found themselves at the center of several major technology trends, and the company is battling with Meta to be the best-performing stock in the S&P 500 in terms of one-year return.
Lately, NVIDIA has seen a rush of artificial intelligence (AI)-related interest in its products — and its share price has more than tripled over the last year. Some investors might be wondering whether all that hype is really deserved, especially ahead of NVIDIA’s upcoming earnings report on Nov. 21.
Why is NVIDIA stock up more than 200% this year?
Despite their name, GPUs are used in a lot more than just graphics processing. They’ve become the go-to hardware for just about any kind of high-performance computing, such as bitcoin mining or, more recently, AI.
NVIDIA was an early pioneer of non-gaming applications for GPUs and has developed lines of GPUs that are specialized for data centers, such as those that power AI. Today, data centers account for most of NVIDIA’s revenue, and the company controls more than 80% of the global GPU market.
NVIDIA’s market cap first crossed the $1 trillion line back in June, and it has generally stayed above that level since then, buoyed by three strong earnings reports this year in which the company’s earnings per share (EPS) and revenue beat Wall Street expectations. In the most recent quarter, data center revenue rose 171% year-over-year.
So in short, NVIDIA’s rapid stock price gains are largely due to its revenue growth — but another factor, according to one financial advisor, is NVIDIA’s reputation as the dominant provider of AI hardware.
“If you take the Wall Street analyst consensus view that Nvidia is two years ahead of any competitors when it comes to developing chips, that has to be worth something,” Malcolm Ethridge, a Washington, D.C.-area certified financial planner with CIC Wealth Management, said in an email interview.
Is NVIDIA valued properly?
NVIDIA’s steep rise in share price over the last year has given the company a dizzying valuation. Its price-to-earnings (PE) ratio — a relative measure of share price as a multiple of profits — is about 100 at the time of writing.
That’s considerably higher than other trillion-dollar tech companies like Alphabet (GOOG), whose PE ratio is about 24, and Microsoft (MSFT), which has a PE ratio around 33.
A high PE ratio doesn’t necessarily mean that the stock is overvalued, but it does mean that NVIDIA is under a lot of pressure to deliver on shareholders’ lofty expectations.
“I think NVIDIA bulls should also be taking into account whether NVIDIA can actually produce enough chips fast enough to meet all of the demand that is out there and fill all of the orders they're currently receiving,” Ethridge said.
“If the answer to that question is no, then I think it's fair to call the stock overvalued,” he said.
Term of the month: Moving averages
Investors trading individual, highly volatile stocks rely on various technical indicators to inform their decisions. In this month’s issue, we’re looking at one stock analysis tool some traders use to try to optimize their timing: moving averages.
What are moving averages?
A security’s moving average is its mean price over a particular period of time. For example, a stock’s 50-day moving average is its mean price over the last 50 days, while its 200-day moving average is its mean price over the last 200 days.
Moving averages come in a few different flavors. Simple moving averages (SMAs) just use the calculation above — the average price over a set period of time. Exponential moving averages (EMAs), on the other hand, change more rapidly in response to recent price changes because they use a weighted average formula that emphasizes more recent prices.
Moving averages change every day, hence the “moving” part. A stock’s 50-day SMA as of yesterday is its mean price over the 50 days before yesterday, while its SMA as of today is its mean price over the 50 days before today. As a result, moving averages can be drawn as lines on stock charts, and some traders look to them for buying and selling signals.
How do you use moving averages?
One of the simplest ways to use moving averages is to look for points where a short-term moving average intersects with a long-term moving average.
For example, if a stock’s 50-day moving average rises above its 200-day moving average, that’s called a “golden cross” and is generally considered a positive signal for the stock’s future price. You can see a golden cross on the chart above, in which Apple’s 50-day SMA crossed above its 200-day SMA in late March. The stock price rose significantly in the months after that cross.
Conversely, a “death cross” is when a stock’s 50-day moving average falls below its 200-day moving average, and it’s generally considered a negative signal for the stock moving forward.
Ethridge said that this kind of strategy can be useful for deciding when to get in and out of a stock you’ve already decided you want to buy or sell — but not for initially picking stocks.
“Technical patterns such as these are better used as a way to confirm your thesis after you've already decided a stock is a buy or sell,” he said.
Dates that could move markets this month
The Federal Reserve’s latest Federal Open Market Committee concluded Nov. 1, after which the central bank decided to hold the federal funds rate at its current level of 5.25% to 5.5%.
The Bureau of Labor Statistics (BLS) will release its monthly employment situation summary on Nov. 3.
The BLS will also release its monthly consumer price index (CPI) report on Nov. 14.
The Federal Reserve Bank of New York is due to release its survey of consumer expectations (SCE) credit access survey — an indicator of trends in consumer credit usage — on Nov. 20.
That Federal Reserve branch is also due to release its latest estimate of the natural rate of interest, or R-star — an important indicator of the future trajectory of interest rates — on Nov. 30.
As mentioned previously, NVIDIA (NVDA) will report earnings Nov. 21 — and it’s not the only big tech stock to report earnings this month:
Qualcomm (QCOM) reported earnings Nov. 1. EPS and revenue both exceeded investor expectations.
Apple (AAPL) reported earnings Nov. 2. Its EPS and revenue numbers also both beat analyst estimates.
Cisco (CSCO) will report Nov. 15.
Alibaba (BABA) will report Nov. 16.
PDD Holdings (PDD) will report Nov. 27.
Salesforce (CRM) will report Nov. 29.
November is also a big month for energy stock earnings, particularly in the oil and gas industry, which could be affected by oil price swings related to the war in Gaza.
Shell (SHEL) and ConocoPhillips (COP) reported earnings Nov. 2. Shell’s profits were slightly below estimates, while ConocoPhillips’ EPS and revenue both exceeded estimates.
Enbridge Energy (ENB) and Dominion Energy (D) will report Nov. 3.
Diamondback Energy (FANG) and Coterra Energy (CTRA) will report Nov. 6.
Enterprise Products Partners (EPD), Occidental Petroleum (OXY) and Devon Energy (DVN) will report Nov. 7.
TC Energy (TRP) will report Nov. 8.
Constellation Energy (CEG) will report Nov. 14.
The author owned shares of Alphabet at the time of publication.