Wall Street Brunch: It’s Nvidia Time

Summary:

• Nvidia’s earnings report on Wednesday is pivotal, with Wall Street expecting EPS of $0.74 on revenue of $32.97 billion; guidance is crucial for future momentum.
• Analysts are bullish on Nvidia, with recent price target hikes, but option positioning suggests challenges in breaking above the $145-$150 range.
• Other key earnings reports this week include Walmart and Target.
• Economic indicators focus on housing, with starts, building permits, and existing home sales data due.

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Nvidia’s guidance could make or break the AI trade for the rest of ’24. (0:18) Health check on the housing market. (3:34) First U.S. mpox case. (6:05)

Welcome to Nvidia (NASDAQ:NVDA) week.

After the bell on Wednesday, Wall Street will forget sentiment, forget politics, even forget the Fed as the company with the world’s most influential stock releases earnings.

Nvidia could make or break the momentum trade for the rest of 2024 given its impact on not just chips stocks, but all AI plays.

Wall Street expects EPS of $0.74 on revenue of $32.97 billion. But guidance will be more important, especially as 2025 earnings growth expectations for the Magnificent 7 have lost nearly all their premium, dropping close to the 14% expected for the S&P 500 (SP500) as a whole.

Right now, the forecast for fiscal Q4 ending January is for EPS of $0.82 on revenue of $37.02 billion. That’s the quarter when the new Blackwell GPU ramp starts.

Wall Street analysts have been bullish heading into the numbers. Check out these price target hikes in the last week: HSBC to a Street high $200 from $145,

Jefferies to $185, Oppenheimer to $175, Susquehanna to $180, Wedbush to $160, Raymond James to $170, Mizuho to $165. Initiated at Redburn at $178 and $175 at Piper Sandler with the designation of top large-cap pick.

A lot of confidence, but a lot that can go wrong if guidance looks shaky.

Seeking Alpha analyst Mott Capital notes that option positioning suggests that the stock may have a difficult time breaking above the $145 to $150 range.

In “typical fashion,” option activity is “bullish on the stock following results and sees the stock’s price rising or falling by 8%, which is equivalent to the market cap swinging by $279 billion, up or down,” they said. “That is because the (implied volatility) for the stock is relatively high for the options expiring on November 22 at around 90%.”

“That implied volatility will likely continue to rise as we head into the company’s results. However, once the company reports results and event risks pass, the IV will fall sharply like it does following results for all events and earnings.”

Earnings also arrive for two retail heavyweights: Walmart (WMT) and Target (TGT).

For Walmart, the Street is expecting EPS of $0.53 and sales of $166.44 billion. Wells Fargo said it is expecting “another strong quarter” and a beat and raise as it continues “to take meaningful share as consumers remained focused on value, while hurricane stock-up likely provided a benefit.”

The forecast for Target is for EPS of $2.30 and sales of $25.9 billion. There have been 22 upward revisions on the bottom line compared with 8 downward revisions.

Sungarden Investment Publishing, who lead the Sungarden YARP Portfolio Investing Group on Seeking Alpha, says Target is the better stock using a yield-at-a-reasonable-price approach.

“Dividend safety was the ‘death knell’ for …potential consideration of WMT for now,” they said, while TGT has solid profitability and dividend safety with reasonable valuation.

Also on the earnings calendar, on Monday, Trip.com (TCOM), Symbotic (SYM), AECOM (ACM), BellRing Brands (BRBR) and Brady (BRC) report.

Joining Walmart on Tuesday are Lowe’s (LOW), Medtronic (MDT), Keysight Technologies (KEYS) and Viking Holdings (VIK).

Along with Nvidia and Target on Wednesday, TJX (TJX), Palo Alto Networks (PANW) and Snowflake (SNOW) issue numbers.

Thursday brings Intuit (INTU), Deere & Company (NYSE:DE), Ross Stores (ROST), Construction Partners (ROAD), NetApp (NTAP) and BJ’s Wholesale Club Holdings (BJ).

Looking to the economy the calendar for indicators is more subdued.

There will be insight into the housing market, though. Housing starts and building permits for October arrive premarket Tuesday. Economists expect starts to come in at an annual rate of 1.34 million and permits for future building to arrive at 1.44 million. Both estimates are about in line with September’s figures.

Existing homes sales figures hit Thursday, with the forecast for the rate to rise to 3.91 million.

Wells Fargo economists say “sturdy demand for new construction remains a key tailwind for builders.”

“We expect the pace of single-family building to gradually improve over the next year, aided by marginal dips in financing costs for builders and mortgage rates for buyers. We are mindful, however, that mortgage rates are likely to remain elevated for some time, inhibiting a full-on housing market recovery,” they said.

If existing sales came in as expected, it “would mark the fifth consecutive month below the 4.00M pace, a feat not achieved since records began in 1999 and emblematic of the challenges facing the housing market,” they added.

Even though this week’s calendar lacks an A-list indicator, Fed chief Jay Powell showed the markets last week that just one sentence from the Fed can shift sentiment.

Powell said, “the economy is not sending any signals that we need to be in a hurry to lower rates.”

Odds of the Fed cutting by a quarter point in the December meeting, which had jumped to 85% following the in-line CPI figures, have slipped down to 60%.

Pantheon Macro economist Samuel Tombs is still looking for a cut of 25 bps next month, but says the pace of cuts “likely will slow next year, as the federal funds rate moves closer to its neutral level and Mr. Trump begins to implement elements of his agenda.”

Fed speakers to look out for this week include Chicago Fed President Austan Goolsbee on Monday and Tuesday and Fed Governors Lisa Cooks and Michelle Bowman on Wednesday. Cleveland Fed President Beth Hammack, Kansas City Fed President Jeff Schmid and Fed Vice Chair Michael Barr speak Thursday and Bowman is back on Friday.

In the news this weekend, Super Micro Computer (SMCI) plans to submit a plan by Monday that would allow it to continue trading on the Nasdaq. That’s according to Barron’s.

The AI server company said in an SEC filing this week that it needs more time to file its latest quarterly earnings report. It also said it needs more time to hire a new accounting firm and prepare the Q1 2025 Form 10-Q.

If the company is delisted, it would be the second time. It was delisted in August 2018 for a delay in filing reports in its finances. It regained its listing in January 2020.

California health officials have confirmed the first U.S. mpox case caused by the Clade I variant linked to the ongoing mpox outbreak in Africa.

The California Department of Public Health announced that it detected the Clade I mpox variant in an individual with a recent travel history to Africa. The CDC has been notified of the case found through lab testing.

The agency said that the individual is in recovery and isolating at home after receiving medical care in San Mateo County. Healthcare workers are reaching out to the patient’s close contacts.

But “there is no concern or evidence that mpox Clade I is currently spreading between individuals in California or the United States,” CDPH said.

For income investors, Chevron (CVX) goes ex-dividend on Monday, with a Dec. 10 payout date. Walgreens (WBA) goes ex-dividend the same day, paying out Dec. 12.

Hasbro (HAS) and Target (TGT) go ex-dividend Wednesday (interesting occurrence here of Target going ex-dividend the same day as it reports earnings). Hasbro pays out on Dec. 4 and Target pays out on Dec. 10.

Companies forecast to increase their quarterly dividend payouts include AECOM (ACM) to $0.24 from $0.22, Dolby Labs (DLB) to $0.32 from $0.30 and Matthews International (MATW) to $0.25 from $0.24.

And in the Wall Street Research Corner, BofA looked at the most overbought and oversold stock markets around the world, based on their deviations from their 200-day moving averages.

Leading the overbought markets is Singapore. (EWS), up 21% from its 200-day moving average. That’s followed by China (FXI), up 12.4%, Wall Street U.S.A (SPY) (QQQ) (DIA) up 11.4%, Canda (EWC), up 10% and Taiwan (EWT) up 9.9%.

Korea (EWY) is the most oversold market, down 15.8% from its 200-day moving average. Right behind is Mexico (EWW), down 15.3%, Portugal (NQPT), off 12.3% and France (EWQ) off 7.5%. Turkey (TUR) rounds out the top 5, down 7.4%.

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