Target Struggles While Nvidia Thrives: A Tale of Diverging Fortunes
After releasing their Q3 results on Wednesday, Target TGT and Nvidia NVDA are in the spotlight, attracting significant investor attention.
Target’s stock has dropped over 20% following a disappointing Q3 report, while Nvidia’s shares remain surprisingly stable, even after exceeding estimates and reaching a new revenue record.
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Target’s Underperformance
Target reported Q3 sales of $25.66 billion, a 1% increase from a year earlier, but this was below the expected $25.91 billion. CEO Brian Cornell pointed to unique challenges and increasing costs that impacted profits, with Q3 earnings per share (EPS) falling 12% to $1.85, missing the Zacks EPS Consensus of $2.29 by 19%.
Investors have been cautious about Target’s performance, especially after the company exceeded EPS estimates by 19% in Q2, achieving $2.57 per share compared to the expected $2.16.
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Nvidia’s Strong Showing
In contrast, Nvidia experienced a staggering 93% increase in Q3 sales, reaching a record $35.08 billion, up from $18.12 billion a year ago. This result exceeded sales estimates of $33.32 billion by 5%. Furthermore, Nvidia’s Q3 EPS of $0.81 doubled from $0.40 a year earlier, comfortably surpassing the projected $0.75.
Nvidia has consistently beaten earnings expectations for eight quarters, averaging a surprise of 9.79% over the last four reports. The company has also topped sales forecasts for 23 consecutive quarters, with an average surprise of 6.7% in the last four reports.
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Target’s Future Outlook
For Q4, Target projects adjusted earnings between $1.85 and $2.45 per share, below the current Zacks Consensus of $2.62, reflecting a potential decline of 12%. For the entire fiscal year 2025, Target now forecasts an adjusted EPS range of $8.30 to $8.90, which is lower than the expected $9.54, indicating a growth reduction of 7%. Additionally, the company anticipates comparable Q4 sales to be flat, falling short of Zacks’ estimate of $30.76 billion, a 3% drop.
Nvidia’s Guidance & Blackwell Developments
Nvidia has provided Q4 revenue guidance, anticipating sales of approximately $37.5 billion, plus or minus 2%, compared to Zacks’ estimate of $36.84 billion. Although the guidance might not have thrilled investors, the company noted that its highly anticipated Blackwell GPUs are already sold out for a year, with shipments starting this quarter and production escalating next year.
The Blackwell GPUs are expected to surpass previous high-performance AI chips such as Nvidia’s H200 series and AMD’s AMD MI300 series.
Concluding Thoughts
Currently, Nvidia enjoys a Zacks Rank #1 (Strong Buy), while Target holds a Zacks Rank #3 (Hold). With earnings estimates for Nvidia trending positively, the company’s strong quarterly performance suggests potential for further growth.
On the other side, Target’s shares are at their lowest price-to-earnings (P/E) ratio in over a decade, yet investors may want to wait for more favorable buying conditions given the retailer’s disappointing Q3 results.
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