Mark your calendars! Nvidia (NVDA) is set to unveil its much-anticipated third-quarter earnings report on November 20, and this could be the most critical quarter the company has ever faced. As a long-time supporter of Nvidia, my optimism isn't just based on beating earnings estimates; it hinges on the expectation of an upward revision of annual guidance and positive commentary regarding its innovative Blackwell technology.

Key Metrics to Watch

In this upcoming report, investors should keep a close eye on Nvidia's projected figures. For Q3 of fiscal year 2025, the company has set an ambitious revenue forecast of around $32.5 billion and gross profit margins projected at an impressive 75%. These numbers are not only significant for Nvidia’s size but are also indicative of its operational efficiency and premium market positioning.

Analysts have raised the stakes, with consensus estimates for EPS hitting $0.74 and revenue expectations climbing to $32.94 billion. A notable trend indicates that 31 out of 37 analysts have increased their EPS projections in recent months, and 34 out of 41 have revised revenue estimates upward. If Nvidia meets or exceeds these predictions, it would mark substantial growth from last year's Q3, where it reported revenues of $18.1 billion with 74% gross margins.

Blackwell Technology: The Game Changer

One of the most critical elements that could propel Nvidia’s stock after the Q3 results is the anticipated performance of its Blackwell technology. With an ever-increasing demand for Nvidia's chips, the focus is on whether the company can manage its production ramp-up effectively. This is vital, as investor sentiment could hinge on whether Nvidia can meet this high demand without compromising quality or delivery times.

Should Nvidia's management announce successful production increases, even in the face of high demand, it would likely spark a positive reaction from investors. For example, if they disclose that despite hefty demand, they have secured additional supplies from manufacturers, it would solidify confidence in their supply chain management.

A Look at Comparables: Palantir's Earnings

While I maintain a bullish outlook on Nvidia ahead of its report, it’s essential to recognize the exceedingly high expectations currently set. A recent parallel can be drawn from Palantir (PLTR), another key player in the AI sector. Despite facing a steep valuation due to a significant rise in its stock price, Palantir enjoyed considerable gains following its Q3 earnings—largely thanks to an optimistic revision of guidance.

Unlike Palantir, Nvidia's current valuations seem more justifiable when accounted for growth. The stock trades at a forward price-to-earnings (P/E) ratio of 52x with a robust expected EPS growth of 35.4% over the next few years, reflecting a PEG ratio of 1.47x, notably lower than Palantir's 6.5x. This indicates that Nvidia's stock is attractively priced relative to its growth potential.

Crafting the Right Investment Strategy

As a steadfast Nvidia bull, it’s critical to adopt an investment strategy that balances potential gains with risks. Current sentiment divides investors into two camps: those who anticipate Nvidia is at the start of a hypergrowth phase, justifying a high valuation, and those fearing a potential market correction triggered by the company's first earnings miss.

With an annualized volatility of 51%, watching the 200-day moving average could serve as a more effective barometer for trading decisions than relying on short-term fluctuations. This strategy would entail buying when trading above the 200-day moving average and selling when below it. Currently, Nvidia's 200-day moving average stands at $107.21, while the stock is trading at approximately $148.29, reinforcing a bullish outlook.

Analysts’ Views on Nvidia

Wall Street analysts echo a positive sentiment on Nvidia, with many raising their price targets since the last quarter. The consensus remains a strong buy, as evidenced by 39 out of 42 analysts recommending the stock positively and an average target price of $157.82, representing a potential upside of 6.43%.

Conclusion

In summary, I remain optimistic about Nvidia as Q3 approaches. The company's stronghold in AI technology, the promising prospects of Blackwell, and its ability to meet overwhelming demand underscore a favorable outlook. While the pressure to perform is immense, now is not the time to lock in profits or sell. Nvidia's stock is still trading above its long-term moving averages, and given its reasonable valuation adjusted for growth, I firmly believe it’s a prime buying opportunity ahead of the earnings report.