What happened
Shares of Nvidia (NVDA 5.91%) charged sharply higher Wednesday, jumping as much as 5.5%. As of 12:42 p.m. ET today, the stock was still up 5.3%.
The catalyst that sent the semiconductor giant higher was positive commentary by an investment banker.
So what
Nvidia stock was on the receiving end of some bullish comments by Spouting Rock Asset Management's chief investment officer, Rhys Williams, according to Barron's. After the share price fell as much as 34% from its November highs, Williams argues that the selling is overdone and Nvidia stock is a buy, particularly in light of the massive opportunity presented by the metaverse.
Image source: Getty Images.
Williams calls Nvidia stock "one of the best plays on the metaverse." He goes even further, citing several secular tailwinds, concluding that the company is "hitting on all the touchpoints on where the world's going."
While Nvidia continues to generate the lion's share of its revenue from graphics processing units (GPUs) used for video games, the company's data center segment has been growing at a faster clip. The segment, which creates processors for growth areas including data centers, cloud computing, and artificial intelligence, accounted for 38% of revenue during the preceding four quarters and could soon overtake its gaming segment.
The analyst also believes that analysts' consensus estimates, particularly when it comes to profits, are far too low, positing that it "would be a huge deceleration," Williams said. "I am expecting them to do better than consensus," suggesting that Nvidia's management has historically issued conservative guidance, giving it a clear path to exceeding expectations.
Now what
Williams may be on to something, as expectations are historically low. Analysts' consensus estimates are calling for Nvidia to generate revenue of roughly $7.4 billion, in line with the company's guidance. However, analysts also expect earnings per share (EPS) of roughly $1.22, which would represent a significant decline from the record-setting adjusted EPS of $3.10 Nvidia delivered in the year-ago quarter.
Additionally, Nvidia has beaten Wall Street's expectations in each of the preceding four quarters, and usually by a wide margin.
Given the low bar, investors might be pleasantly surprised when Nvidia reports earnings on Feb. 16 after the market close.
