NVIDIA's first-quarter performance won't look good, the key is the second-quarter guidance!

Nvidia is set to release its Q1 2024 financial report after the US stock market closes on Wednesday.

Wall Street expects Nvidia's Q1 indicators to drop significantly year-on-year: revenue is expected to fall by more than 21%, adjusted earnings per share are expected to fall by nearly a third, and core gaming revenue is expected to almost halve.

However, analysts generally expect Nvidia to exceed these expectations in strong data center sales.

Despite poor sales of Nvidia gaming graphics cards, Nvidia's stock price has more than doubled this year due to the investment boom in artificial intelligence sparked by ChatGpt.

Q1 Financial Forecast

FactSet analysts surveyed expect Nvidia's Q1 adjusted earnings per share to be 92 cents and revenue to be $6.53 billion, lower than last year's $1.36 and $8.29 billion.

Analysts expect gaming revenue to be $1.97 billion, almost half of last year's $3.62 billion.

Data center sales are expected to be $3.9 billion, up 4% year-on-year.

The most important data may be guidance for the second quarter.

Analysts expect Q2 earnings per share to be $1.07 and revenue to be $7.17 billion, with $4.29 billion from data center business and $2.13 billion from gaming business.

Sales of New Graphics Cards

Nvidia announced last week that its RTX 4060 Ti 8GB gaming card with the "Ada Lovelace" architecture will be available on May 24 for a suggested retail price of $399, while the RTX 4060 Ti 16GB version will be available in July starting at $499.

Nvidia said the regular RTX 4060 starts at $299 and will also be available in July. The company said the cards' "performance is twice that of the latest game consoles."

Truist analyst William Stein pointed out: "We recently learned from suppliers that demand for AI GPUs has increased. What surprised us even more was that this growth was for lagging edge GPUs (A100/A800). We expect this to lead to an increase in revenue and profit margin in the first and second quarters."

According to suppliers, they saw an increase in demand in March, which continued into April.

Investment Recommendations

KeyBanc Capital Markets analyst John Vinh reiterated his overweight rating on Nvidia and raised his target price from $320 to $375.

Vinh said Nvidia will benefit from its strong sales of the latest data center H100 product and the launch of future gaming graphics cards.

Although Nvidia's valuation is as high as 48 times expected earnings for the 2025 fiscal year, he said: "Nvidia's market position and gross margin of over 70% should ensure a meaningful premium over its semiconductor peers." "

In addition, Susquehanna Financial analyst Rolland also gave Nvidia a positive rating and a target price of $350.

Of the 47 analysts surveyed by FactSet, 35 rated Nvidia as a buy and 12 rated it as a hold.

Since April, Nvidia has not received any sell ratings. As of Monday, Nvidia's average target price was $296.70.