Equities Update: Imperial Brands, Nvidia, Big Yellow…

Imperial Brands profits soar as vaping transition begins to pay off

Mark Crouch, Market Analyst at eToro says: “Imperial Brands’ shares have been soaring in 2024, climbing by more than a third, and today brought more good news for shareholders. The tobacco giant reported a 4.6% increase in operating profit for the year, alongside a promise of further shareholder returns through buybacks and dividends.

“Despite a cloud of regulatory uncertainty gathering over the tobacco industry, tobacco stocks continue to attract a long line of investors, even as global demand for traditional tobacco products declines. Imperial Brands’ pivot into vaping products has been a key growth driver as it ramps up investments to diversify its portfolio, positioning itself for potential regulatory headwinds down the road.

“While some investors initially doubted whether this transition could ever replicate the profitability of its traditional tobacco business, the growth trajectory in the vaping sector is increasingly promising, with Imperial Brands revenues from smoking alternatives jumping by 26% in the last twelve months, and while the figures are still far from those generated by tobacco sales, the positive momentum is fuelling investor optimism.”

Cancel your Wednesday evening plans; Nvidia is reporting its quarterly earnings

Josh Gilbert, market analyst at eToro says: “The big question is, can the biggest company in the world beat expectations and raise Q4 guidance again? The answer is yes. Once again, this is the key driver of a potential price boost for the stock. The market now expects Nvidia to not only beat estimates but also raise its guidance significantly, building plenty of optimism for 2025.

“The market is guiding for earnings of USD$0.74 on revenue of USD$33.2 billion, which would see year-over-year growth of 84% across both metrics. Nvidia’s own revenue forecast for the quarter was USD$32.5 billion. Data centre revenue is set to reach USD$29 billion, doubling from the same period last year. Free cash flow is set to rise to USD$16.4 billion and net income is expected at USD$18.5 billion.

“Nvidia’s data centre revenue is seeing huge growth on the back of the AI spending frenzy from big tech. Once again, this quarter, tech stocks increased their capital expenditures and that spending is going to the best in the business: Nvidia. This is a clear early sign that sales will remain robust as other tech giants race to increase their own profit from their burgeoning AI investments.

“The ramp-up of NVIDIA’s Blackwell GPU chips will remain an area of focus. CEO Jensen Huang has said that demand for Blackwell is ‘insane’. Last month, it was announced that the cutting-edge GPU was already sold out for the next 12 months, and the impact of this long-term high demand will likely continue to be a welcome presence in these quarterly earnings reports.

“The company’s $50 billion buyback program—announced last quarter—has also been approved by its board. Stock buyback programs are often a sign that a company believes its shares are undervalued. Given NVIDIA’s incredible run in this bull market so far, this inferred belief would indicate that the company’s management believes a strong 2025 is all but assured.

“Another focus will be on margins. Gross margin is expected at 75%, down from the last three quarters. However, the market expects those margins to fall again next quarter but stay comfortably above 73%. These margins are impressive, but when you’re the biggest company in the world and branded as magnificent, the market expects nothing but excellence. However, its margins are set to grow again early next year as its Blackwell chips begin their rollout.

“Nvidia shares have climbed 196% year-to-date, adding to its 238% gain in 2023. The market may be disappointed if we don’t get a big raise on guidance, similar to last quarter, given that expectations almost seem unattainable. But investors will likely see weakness as an opportunity, given the AI boom feels like it’s only just getting started. We will likely see volatility no matter the result, options pricing suggests an 8% move either way following its earnings.”