Should I buy Nvidia shares ahead of second-quarter earnings results?

Nvidia Corporation (NASDAQ: NVDA) shares have weakened from their recent highs above $208, and the current price stands around $194. Nvidia is scheduled to announce second-quarter earnings results on Wednesday, August 18, after market close, and according to estimates, Nvidia should post strong earnings results.

Fundamental analysis: Nvidia should post strong earnings results

Nvidia Corporation will announce second-quarter earnings results this Wednesday, and it is important to say that data center, automotive, and gaming sales are going to be key areas that investors will focus on. Aaron Rakers, an analyst from Wells Fargo, said that he expects strong second-quarter results from Nvidia; the EPS estimate stands at $1.02 while the revenue estimate is $6.34 billion.

In the second quarter of 2020, Nvidia Corporation reported a profit of $2.18 per share on revenue of $3.87 billion; still, those results were prior to a four-for-one stock split that Nvidia enacted on July 20. The analyst Aaron Rakers from Wells Fargo assigned a $245 price target on the stock, and he will look for more insights on Nvidia’s artificial intelligence as well as any updates on the company’s automotive business.

John Pitzer, an analyst from Credit Suisse, also expects strong quarterly results from Nvidia but warned that the company’s gaming business would see some negative impact. Nvidia has significant potential for market expansion, but John Pitzer assigned a $175 price target on the stock, which is around 10% below the current price.

Nvidia shares have weakened from their recent highs above $208 after China reported that its economy grew at a slower-than-expected pace in July. This negative news hit all leading semiconductor makers and other bellwether tech companies building their products in China.

Another negative news is that China’s antitrust authority hasn’t accepted the planned $40 billion deal for Softbank to sell Arm Holdings to Nvidia. Nvidia trades at more than seventy times TTM EBITDA, the book value per share is around $7.5, and fundamentally looking, Nvidia’s valuation is certainly not cheap.

Technically, Nvidia shares could advance above the current price levels if the company posts strong second-quarter results, but the risk/reward ratio is not good for long-term investors.

Technical analysis: $200 represents the current resistance levelData source: tradingview.com

Nvidia’s stock price has fallen by almost 7% after reaching a high of $208.75 on July 7, and if the price falls below $190 support, it would be a strong “sell” signal. The next price target could be around $180 or even below, and this could be an indication of the positive trend reversal.

On the other hand, if the price jumps above $200 resistance, it would signal to trade Nvidia shares, and the next target could be around $210.

Summary

Nvidia is scheduled to announce second-quarter earnings results on Wednesday, August 18, after market close, and according to estimates, Nvidia should post strong earnings results. The analyst Aaron Rakers from Wells Fargo assigned a $245 price target on the stock, while John Pitzer, an analyst from Credit Suisse, assigned a $175 price target on the Nvidia stock, which is around 10% below the current price.

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