by Ian Harvey
August 11, 2017
Here is follow-up of NVIDIA Corporation (NASDAQ:NVDA) after reporting earnings; handily crushing analyst expectations, but suffering a pull-back in stock price due to too high investor expectations.
The Suggestion……from “Option Trade - NVIDIA Corporation (NASDAQ:NVDA) Calls - Monday, August 07, 2017”
** OPTION TRADE: Buy the NVDA SEPT 15 2017 175.000 CALL at approximately $7.40. Place a pre-determined sell at $15.00.
Note: No protective stop losses added -- but if you wish to do so make it $3.00.
On Aug. 10, graphics specialist NVIDIA Corporation (NASDAQ:NVDA) reported solid earnings results. Revenue was $2.23 billion, representing a 56% year-over-year surge. Operating and net income handily outpaced revenue growth, growing 117% and 123%, respectively, and earnings per share on a non-GAAP basis was $1.01, up 91% year over year.
Analyst consensus going into the report was for revenue of $1.96 billion and earnings per share of $0.70, so NVIDIA handily crushed analyst expectations.
NVIDIA also provided robust financial guidance for the current quarter, calling for revenue of $2.35 billion, which handily tops analyst consensus of $2.13 billion (and even the "high" estimate of $2.25 billion).
Probably many short-term speculators expected NVIDIA to "beat" by more than it ultimately did (though, again, the results were very good), which is leading to this sell-off.
Friday’s market open saw NVIDIA down roughly 5%; and, is starting to move to the positive again.
On Tuesday, this options trade was up to as
much as $11.00, and if the option trade had been exited at this point in time,
then a potential profit of 48% would have been achieved.
NVIDIA is a hot stock -- arguably the hottest stock in technology today. Over the last couple of years, investors have really gotten excited about the company's story, particularly as it has substantial exposure to many of the big trends in computing and tech in general (e.g., artificial intelligence, gaming, self-driving cars, and so on).
Obviously NVIDIA not only participates in these high-growth areas, but that it pioneered many of the technologies underpinning them.
This strong exposure to many of the great, high-value secular trends in computing, coupled with the company's nearly flawless execution in capitalizing on those trends, may have led to very high investor expectations.
Therefore, this downturn of stock price will allow us to enter again in the near future at a better price and possibly recover some of the lost capital and/or profit!