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Nvidia’s Earnings Come at a Crucial Time. It Will Take a Lot to Lift the Stock.

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Nvidia

is set to report third-quarter earnings results after the market closes on Wednesday. With shares hovering around record highs, it will take a blockbuster report to move the needle for investors.


Nvidia

stock was down 1.8% to  $297.62 on Wednesday morning, but was still up nearly 128% year to date. Shares surged earlier this month as investors bought in on hype surrounding Nvidia’s financial prospects amid billions in investment, most notably from


Facebook

‘s newly rebranded parent


Meta Platforms

(FB), to build a theorized next phase of the internet called the metaverse.

As investors have looked beyond Facebook founder Mark Zuckerberg’s pivot toward a new name and corporate focus, they have sought firms that may stand to gain from a step change toward interactive 3D virtual worlds. Nvidia has been an obvious choice because its graphics cards could power the metaverse’s visuals.

Meanwhile, the company’s efforts to build an open platform for virtual collaboration that it calls Nvidia Omniverse will help artists collaborate in real time and create accurate simulations with realistic lighting. Analysts at Wells Fargo wrote earlier this month that as many as 20 million designers and engineers could turn to Nvidia Omniverse. They argued Nvidia is an “enabler/platform for the development of the Metaverse across a wide range of vertical apps.” 

Still, it will take time for the tech to catch up to Zuckerberg’s aspirations. In the meantime, analysts will turn to nearer-term releases and results.

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For the third quarter, analysts polled by FactSet forecast adjusted earnings of $1.11 a share and sales of $6.82 billion.

The earnings report or outlook may need to be a blowout for the stock to continue rising. Though 34 of the 43 analysts listed by FactSet rate the stock at Buy or the equivalent, the mean price target for the stock is $280.70, well below its level on Wednesday morning. Bullish analysts will either need to raise their targets or lower their ratings if shares hold above their targets.

Not even renewed scrutiny in the U.K., related to Nvidia’s proposed acquisition of the chip designer Arm has stopped the graphics card stock’s year-to-date run. Nvidia said in September 2020 that it would buy Arm for $40 billion, but the deal has run into concern from regulators related to its national security and competitive implications. The U.K.-based company licenses intellectual property to big tech players like 


Apple

(AAPL), Amazon.com (AMZN), and 


Samsung
,
 which use Arm’s chip designs in mobile phones and computer processors.

Write to Connor Smith at [email protected]

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