Nvidia Reports Earnings Next Week. What Does Its Chart Say?

As I write this on Tuesday (Nov. 12), the Street is looking Nvidia to report $0.74 in adjusted earnings per share on nearly $33 billion of revenue. That would amount to 100% earnings growth and 82.3% in revenue gains year over year.

But as incredible as such gains would seem, that would actually represent a deceleration of growth for Nvidia -- probably due to the simple laws of scale. CEO Jensen Huang has said that demand for Nvidia's products remains "over-subscribed," but large year-over-year gains are impossible to match forever.

Nvidia saw 152% in year-over-year earnings growth in its fiscal Q2 after four successive quarters of 440% or more in annual gains. Revenue growth likewise fell to "only" 122% year on year in fiscal Q2 after three successive quarters of 206% or more in annual gains.

In fact, of the 36 sell-side analysts that I've found who cover NVDA, 31 have revised their earnings estimates higher since the current quarter began. (The remaining five revised their forecasts lower.)

Looking at Nvidia's fiscal Q2 financials, the company had $48.7 billion of trailing-twelve-month operating cash flow as of July 28. That included $1.9 billion of capex (capital expenditures), leaving $46.8 billion of free cash flow.

The firm used $26.4 billion of that free cash to repurchase common stock, plus another $540 million for dividends to shareholders.

All in, Nvidia had a $34.8 billion cash position as of July 28, as well as $59.6 billion of current assets. Current liabilities added up to $14 billion, making for a seemingly robust 4.27 current ratio.

The company had no short-term debt on its books, while total assets amounted to $85.2 billion (of which goodwill and other intangibles only made up a seemingly conservative 6.5%).

Meanwhile, total liabilities less equity came in at $27.1 billion, including $8.5 billion of long-term debt. Nvidia could have paid that out of pocket more than four times over out of its available cash.

Here's NVDA's chart as of Nov. 12 going back roughly one year:

Readers will see that the stock rallied from late October 2023 to June 2024, as denoted by the green and red vertical lines above.

If we apply a Fibonacci model (the shaded-blue above), we can see that Nvidia found support at about $90 -- its 50% retracement level -- in very early August.

Next, going back to the start of the Fibonacci model and applying an Andrews' Pitchfork model (the purple line above) shows that NVDA has developed a tight pattern since leaving its Fibonacci period in August.

But heading into next week's earnings report, NVDA is threatening to take the Pitchfork's upper trendline (the black line at the chart's upper right). The upper trendline serves as Nvidia's moving pivot, which the above chart projects will stand at about $155 by Nov. 20.

Meanwhile, readers will see that Nvidia's Relative Strength Index (the gray line at the above chart's top) looks strong, but not overbought.

The stock's daily Moving Average Converge Divergence indicator (or "MACD," denoted by black and gold lines and blue bars at the chart's bottom) appears ever-so-slightly bullish as well.

Of the MACD's three components, the 12-day Exponential Moving Average (or "EMA," denoted by the black line at the bottom of the chart) is above the 26-day EMA (the gold line). Meanwhile, the histogram of the 9-day EMA (the blue bars at the bottom) is just above zero. All of that represents an historically bullish signal, although not an overwhelming one.

Add all of the above up and Nvidia looks about as fundamentally sound as a firm could be. Projected demand for its products also looks intense enough for the firm to keep growing sales and perhaps even margin.

What the stock does next week will likely depend on the guidance provided and how well the company's analyst conference call goes.

True, NVDA looks expensive at 37x forward earnings, but it's pretty much always been on the expensive side. The stock's forward price-to-earnings ratio is actually down from 44x this past summer and 63x the summer prior to that.