Nvidia Earnings Update Brings Volatility and Potential Upside

Nvidia (NVDA) has been underwhelming investors lately, but August may bring a change in fortunes. Despite being on top of the market cap list, Nvidia's performance has trailed the market's year-to-date and past-year gains.

The company's financial update is just three weeks away, scheduled for August 26, which could bring volatility to the stock. Analysts are expecting revenue to jump 96% year-over-year to $91.85 billion in the fiscal second quarter, with earnings per share nearly doubling to $2.08.

Nvidia has a history of beating analyst expectations by 3-6%, but even this may not be enough to impress investors. The company's stock price has moved lower after each of its last four quarterly updates, despite stellar top-line growth and modest earnings beats.

However, Nvidia is trading at a reasonable valuation, with a price-to-earnings ratio of 22 times fiscal year earnings and less than 16 times next year's target. The company's momentum is building, with revenue growth accelerating over the past four quarters, despite trade restrictions in China and supply-chain constraints.