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An earnings report from NVIDIA Corporation (NASDAQ:NVDA) will be closely watched by investors and could be a market-leading indicator, a market strategist tells Benzinga ahead of the company’s earnings release on August 28 after the market close.
Nvidia profits in view: According to data from Benzinga Pro, analysts expect Nvidia to report second-quarter revenue of $28.46 billion, up from $13.51 billion in the second quarter of last year.
Nvidia is estimated to report second-quarter earnings before interest and taxes of 64 cents per share, compared to 27 cents per share in the second quarter last year.
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Nvidia has beaten revenue estimates in seven consecutive quarters and nine of the last 10 quarters. The company has also beaten earnings per share estimates in six consecutive quarters and eight of the last 10 quarters.
Jay Woods, chief global strategist at Freedom Capital Markets, emphasized the importance of Nvidia’s earnings report for the market in an interview on Benzinga’s “PreMarket Prep.”
Woods said there was a pause in Magnificent 7 stocks, including Nvidia.
“We’re now seeing a consolidation of these Mag 7 names,” Woods said.
The market strategist said that Nvidia was the decisive factor in the market change last August.
On August 23, 2023, the stock gapped at the open, closed the gap, and closed slightly higher after the earnings report. In the following months, the stock fell from $480 (now split-adjusted at $48) to $400 (now split-adjusted at $40) before breaking out in January 2024.
Woods said Nvidia is one to watch next week and that the $140 mark could be an important indicator ahead of earnings releases. However, the market strategist does not expect the stock to reach that level before Wednesday.
Why it is important: Woods describes Nvidia as a market leader and a top stock that could cause movement in the markets.
The market strategist said the stock could move many boats depending on how investors react to the earnings.
As one of the most valuable companies in the world, Nvidia has a large weighting in many indices and ETFs, Woods warned.
The SPDR S&P 500 ETF Trust SPY lists Nvidia as the third largest holding with 6.5%, only Apple Inc AAPL with 6.9% and Microsoft Corporation MSFT with 6.6% are more strongly represented.
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Woods warned that investors should be aware that a rebalancing of the SPDR Select Technology ETF XLK has made Nvidia more important than Apple. The fund’s current weighting puts Microsoft first at 21.2 percent, Nvidia second at 20.9 percent and Apple third at 4.9 percent.
“You should know that Nvidia is now more important than Apple.”
Although Woods is cautious about Nvidia’s momentum ahead of its second-quarter results, he still believes the stock is one of the best long-term investments.
“My best idea would be to just buy Nvidia, put it away and never look at it again.”
Woods recalled his father buying shares in Nvidia after hearing him talk about it on television in 2019. His father put the shares away and forgot about them before asking Woods what a 10-for-1 stock split meant for his share. Woods said the investment went from $3,000 to over $100,000.
The example could perfectly illustrate Benzinga’s “If You Invested $1,000” series of stories about how a small investment could pay off over time based on key catalysts and events.
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This article Nvidia is next week’s top stock, says market strategist: Why the best long-term idea is to ‘just buy Nvidia and put it away’ originally appeared on Benzinga.com
