Will Earnings Keep Nvidia's Stock Momentum Alive?

Our preview of the upcoming week's earnings reports Nvidia (NVDA), Home Depot (HD) and Target (TGT).

Nvidia chip
(Image credit: Getty Images)

Nvidia (NVDA, $306.20) stock has been red-hot recently, with the shares up 57% since bouncing off the $200 mark in early October.

But can the semiconductor company keep the momentum going after Nvidia's third-quarter report, scheduled on the earnings calendar for after Wednesday's close?

Wall Street pros are certainly upbeat ahead of the results.

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CFRA Research analyst Angelo Zino, for instance, recently lifted his price target on NVDA stock to $330 from $212 to reflect "our greater confidence surrounding growth prospects and upside potential to consensus estimates."

In addition to an improving supply-chain situation for Nvidia, "we think the possibilities ahead for the graphics processing unit (GPU) space are enormous – gaming, data centers and autonomous vehicles – and poised to gain a greater wallet share from cloud service providers than we previously anticipated," he adds.

The optimism is shared by Wedbush analyst Matt Bryson. True, he recently downgraded the stock to Neutral from Outperform – the equivalents of Hold and Buy, respectively – but said that while he would typically "want to tie a rating change to some sort of negative catalyst; frankly there is none."

Instead, the downgrade was more a result of valuation concerns following the stock's race up the charts. He remains "very bullish" on the semiconductor stock in both the near and long term. As for the company's upcoming earnings report, Bryson believes "the combination of unprecedented demand for both data center and client offerings will allow NVDA to again exceed expectations when they report numbers."

Bryson is anticipating earnings per share (EPS) of $1.10 and revenues of $6.8 billion. Analysts, on average, are guiding for slightly higher earnings of $1.11 per share – up 52.1% year-over-year (YoY) – on $6.8 billion in sales.

Home Depot Headlines Busy Stretch of Retail Earnings

Wall Street will get a clearer look at consumers' spending behavior in the third quarter, with several retailers set to report earnings. Among them is home improvement retailer Home Depot (HD, $371.12), which will unveil its third-quarter results ahead of Tuesday's open.

Analysts, for the most part, are optimistic toward HD stock. Of the 33 following the blue chip that are tracked by S&P Global Market Intelligence, 15 believe it's a Strong Buy and seven say Buy. This is compared to 10 that have it at Hold and one that deems it a Strong Sell.

Raymond James analyst Bobby Griffin is one of those that has an Outperform (Buy) rating on Home Depot, saying he believes valuation levels will remain firm in the near term.

He also thinks the opportunity for an upward earnings revision cycle is stronger for Home Depot compared to sector peer Lowe's (LOW) – which will unveil its third-quarter earnings report the morning of Nov. 17 – and that the retailer's "significant investments" into its supply chain and digital capabilities have it well-positioned to build market share.

"We expect momentum to remain favorable across the third quarter and to be driven by all product categories posting solid gains – including pronounced strength in same-SKU (stock keeping unit) inflation, more big ticket items including appliances and vinyl plank flooring, and other installation services," he adds.

CFRA Research analyst Kenneth Leon, meanwhile, recently downgraded HD stock to Hold from Buy. "Supply-chain challenges remain a worry," he says. As such, Leon is projecting revenue of $34.4 billion for Home Depot's third quarter – down from the $41.1 billion it reported in the second quarter.

Analysts' consensus estimate for Q3 revenue is slightly higher at $34.7 billion – a 3.6% improvement over its year-ago results. Earnings are expected to rise 6.0% year-over-year to $3.37 per share.

Analysts See Modest Q3 Growth for Target

Target (TGT, $260.75) stock is up 17% since its early October lows near $223 – and is now within a chip-shot of its mid-August record peak above $267.

Will TGT's Wednesday morning earnings report give the retail stock an even bigger boost?

Analysts are targeting a modest year-over-year improvement in Target's Q3 report. On average, they're looking for an 8.8% rise in revenues to $24.6 billion and a 0.7% increase in earnings to $2.81 per share.

Still, Deutsche Bank analyst Krisztina Katai, who has a Buy rating on the shares, sees some reason for optimism. "Despite concerns around supply-chain bottlenecks and pricing power in an inflationary backdrop, we remain confident that the setup is favorable for retail stocks, particularly for discounters," she writes in a note.

"Consumer spending power, demand for newness, sustained strength in digital sales, and recovering in-store traffic are driving top-line growth well beyond company guidance," she adds.

Karee Venema
Senior Investing Editor, Kiplinger.com

With over a decade of experience writing about the stock market, Karee Venema is the senior investing editor at Kiplinger.com. She joined the publication in April 2021 after 10 years of working as an investing writer and columnist at Schaeffer's Investment Research. In her previous role, Karee focused primarily on options trading, as well as technical, fundamental and sentiment analysis.