by Ian Harvey
February 15, 2020
NVIDIA stock continued to scream higher on Friday after topping Quarter 4 earnings and revenue estimates. Also, the company’s outlook for the first-quarter topped the Street view – and analysts hiked price targets.
Earnings Predictions Members made potential profits of 401% in 5 days using a call option!
NVDA Corp. saw a huge turnaround at the end of a rough year, powered
in large part by a surge in sales of its graphics processors into the
NVIDIA’s reported revenue of $3.10 billion, with sales jumping 41%, and earnings gaining 136% at $1.54, were better than the Consensus
Estimates of $2.96 billion and $1.34, respectively. Nvidia earnings and sales
had declined for four straight quarters.
Results were driven by a strong data center business as hyperscalers that had curtailed spending through the year, stepped up purchases in the fourth quarter. There were also some vertical-specific GPU deployments for AI/deep learning workloads. NVIDIA expects this business to grow sequentially in the current quarter, indicating that increased data center spending is not a one-off thing.
On Thursday evening’s conference call, Nvidia Chief Executive Jensen Huang said “the primary driver for growth is AI” when it comes to data-center sales.
New device builds hit gaming GPUs for consoles, but NVIDIA products gained ground in gaming PCs and notebooks. The guidance for this segment was disappointing because of a $100 million impact from the coronavirus that the company thinks is in its early phases.
CFO Collette Kress talked about the impact the coronavirus could have on the company.
“While it is still early and the ultimate effect is difficult to estimate, we have reduced our Q1 revenue outlook by $100 million to account for the potential impact,” Kress said.
NVIDIA stock price, at the time of trade execution was sitting at $257.38; and by Thursday, before the earnings report and close of trading, the price was at $270.81.
Friday saw NVIDIA climb to an intraday high of $294.97; to close trading at $289.79 – up 19.01%.
YOU NEED TO BE IN TO PROFIT!
Analysts Upbeat About NVIDIA.....more upward movement expected!
At least eleven brokerages hiked price targets on the company's stock. Brokerage Cowen & Company was the most bullish, raising its target by $85 to $325, higher than Wall Street's median price target of $285.15 and Friday's pre-market price of around $287.
Analysts said they could find little wrong with the quarter except flat automotive sales and were in agreement that data-center sales had “crushed” expectations.
RBC Capital Markets analyst Mitch Steves, who has an outperform rating and a $350 price target, said “we’re struggling to see a negative point in the print” given record data-center revenue, record gross margins, a better than seasonal first-quarter guidance even with the $100 million estimated impact from COVID-19 and the potential tailwind from the company’s pending acquisition of Mellanox Technologies Ltd. which still needs clearance from Chinese regulators.
Evercore ISI analyst C.J. Muse, who has an outperform rating and a $345 price target; said Nvidia blew away expectations with its data-center numbers.
Jefferies analyst Mark Lipacis, who has a buy rating and a $330 price target, called Nvidia the “poster child” for its so-called “4th tectonic shift in computing,” which includes parallel processing, Internet-of-Things computing, monetizing big data, and AI.
Lipacis said he doesn’t “see much competition for NVDA in the AI/Neural Networking markets, due largely to the ecosystem the company has created around its CUDA software and cuDNN libraries.”
Raymond James analyst Chris Caso, who has an outperform rating and a target price of $300, said Nvidia is showing a strong upside “before the product cycle has even gotten started.”
The Recommended Trade – sent Monday, February 10, 2020…..
The maker of graphics and high-performance computing chips NVIDIA Corporation (NASDAQ:NVDA) will report earnings after the market closes. The consensus earnings estimate is $1.66 per share on revenue of $2.96 billion; but the Whisper number is higher at $1.73 per share.
The company's guidance was for earnings of $1.56 to $1.75 per share. Consensus estimates are for year-over-year earnings growth of 110.13% with revenue increasing by 34.24%.
After more than a year of quarterly revenue declines, Nvidia Corp. is finally expected to return to growth just before potentially announcing its next round of new products.
Nvidia’s largest segment, gaming, and the business that has seemed most important to investors in recent years, data-center chips, are expected to drive the growth.
Option trade to consider: Buy the NVDA FEB 21 2020 255.000 CALL at approximately $8.00.
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NVIDIA Continuing To Provide Potential Profits.....
“Earnings Prediction Members”of Stock Options Made Easy executed an options call trade on NVIDIA on Monday, February 10, 2020 – as mentioned above – at a cost of $8.00.
The option trade continued to climb before the earnings report was given to $22.55, providing a potential return of 181%.
However, after the earnings report – released after trading Thursday, February 14 – the trade price hit $40.10; a potential return of 401%.
But, this trade does not expire until February 21, 2020, and based on the excellent earnings report and future outlook of NVIDIA, further profits look likely to be in the pipeline.
NVIDIA Data Center is likely to more than double by 2021.....
Data center strength was broad based, even ahead of the 7nm Ampere product cycles likely to be announced at the GTC/Analyst Day.
There is a positive view on Nvidia's pending Mellanox Technologies, Ltd. (NASDAQ: MLNX) acquisition. The Mellanox deal, which is expected to close early this year, would add accretion and growth potential to the model.
The path for data center to more than double by calendar year 2021 relative to 2019, as hyperscalers embrace the new product cycle and growth broadens to public cloud and other more traditional verticals of the economy.
By the same timeframe, expect gaming to benefit from a new product cycle, creating a path back to $1.6 billion/quarter, excluding Switch. Gross margin still has headroom, as the mix shifts to data center.
NVIDIA stock price will be driven by increasing opportunities in all key secular leading-edge technology demands.
NVIDIA is branching out into additional growth channels, including expanded data center capabilities, and into the science and medical fields, which are benefiting from the strength and speed of Nvidia's GPUs.
With Street expectations for NVIDIA appearing quite reasonable, given the consensus has baked in sub-seasonal growth for the fourth quarter as well as the first quarter of calendar year 2020, the following questions need to be considered.....
Is It Too Late To Get In On NVIDIA Options Trade?
Will A $340 Price Target Manageable?
Will NVIDIA Stock Price Continue To Move Up?
For answers, join us here at Stock Options Made Easy, and get the full details on the next trade.
AS ALWAYS THE DECISION IS YOURS!
An Important Note: That any suggestions for options trade considerations require investors/traders to use their own discretion as to when to enter or exit! As well, it is advisable to do further research and due diligence before executing your trade.
It is sometimes best to exit a trade, if there is already sufficient profit accrued, before an earnings report is presented. GREED can be the undoing of a nice profit!