Nvidia (NVDA) Q1 earnings preview: Can gaming demand hold up?

Nvidia will certainly be in the news again this week as it reports its Q1 results this week...

Tech (2)

Shares of semiconductor chip manufacturer Nvidia (NVDA) gained nearly 3% Friday after the company announced a 4-for-1 stock split. As any Finance 101 student could tell you, a stock split doesn’t have any tangible impact on the valuation or operations of the underlying business per se, but many traders were speculating that this stock split could be preparation for the chip giant to be added to the price-weighted Dow Jones Industrial Average in the future.

Regardless of whether these rumors are ultimately validated, the stock will certainly be in the news again this week as it reports its Q1 results. See the key facts, themes, and price levels to watch for this week’s key earnings report below:

When are Nvidia earnings?

Wednesday, 26 May after the closing bell

Nvidia earnings expectations

$3.28 in EPS on $5.38B in revenues in Q1

What to watch from Nvidia earnings

At a minimum, this week’s earnings report will remind traders how impressive Nvidia’s growth truly is. The consensus expectations, if met, would represent year-over-year growth of 82% in earnings and 75% in sales, breathtaking figures for a firm that’s already worth nearly $400B. The firm’s highly sought-after chips are the backbone of multiple fast-growing industries, from gaming to autonomous driving to AI to cryptocurrency mining, so traders are absolutely viewing the stock as a secular growth story.

In terms of specific areas of focus, gaming is typically the biggest revenue driver for NVDA, and there is some risk that we see that area slow as the developed world starts to emerge from pandemic lockdowns; continued strong demand for gaming chips could hint at more durable growth moving forward, rather than just one-off effects from cooped-up gamers. The other key area to watch will be autonomous driving demand. While this use case represents a small portion of NVDA’s total sales, it is expected to accelerate dramatically in the coming years.

Nvidia (NVDA) technical analysis

Turning our attention to the chart, NVDA has been surprisingly stable around $550 over the last nine months. As of writing, the stock is testing the top of its $470-$620 range, and a strong earnings report could be just the catalyst to drive prices out of their long slumber and renew the longer-term uptrend:

Source: TradingView, StoneX

After digesting the H1 2020 gains for three quarters now, a clean break above last month’s record high near $640 could open the door for a bullish continuation toward $700. That said, a disappointing report could put a lid on the current rally and keep NVDA constrained to its well-trodden range for another couple months.

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