by Ian Harvey
August 15, 2019
NVIDIA Corporation (NASDAQ:NVDA)
Nvidia earnings report will be available after the market closes today, Thursday, August 15, 2019. On Monday we suggested that traders should consider taking a PUT option trade against Nvidia earnings.
Once again, the market has been on a wild ride for the past three days. The stock price has responded to the market’s ups-and-downs; caused by poor economic data from China and Germany putting the focus back on the impact of a bruising Sino-U.S. trade war which is pushing some major economies towards the brink of recession.
Nvidia saw its stock price rise to almost $158 on Tuesday, only to drop to a low close of $148 yesterday.
Below this level it immediately opens up NVDA stock to a possible decline down to $144. Below that and the support range between $130 and $135 is on the table.
YOU NEED TO BE IN TO PROFIT!
Nvidia stock has had a rocky 2019, with shares having swung up and down so far in 2019, with the stock’s ~10% YTD growth lagging the S&P 500’s 13.5% return. Nvidia stock is still trying to find its footing.
One of the major reasons that Nvidia earnings report may be set to crater is that the demand for chips used to mine cryptocurrency evaporated, leaving many sales channels oversupplied. As well, a big growth driver over the past several years -- the chips used in data centers and artificial intelligence applications -- seemed to evaporate overnight. This combination of factors has sent NVIDIA shareholders running for the exits; and Nvidia earnings report in a perilous situation.
NVIDIA is currently at risk of falling behind AMD from a technology perspective and ceding market share to its smaller rival, particularly in the fight for market share in the discrete graphics card business.
Exit or Hold?
We entered the trade at $7.76 on Monday; and at close of market yesterday the price of the option had climbed to $10.07. This has now returned a potential profit of approximately 30%. If the markets continue their downward movement today then more profit is expected before Nvidia earnings report is presented.
However, if all goes according to the thesis laid out in “Nvidia Earnings Questionable?”, then there could be a great deal more potential profit available after earnings.
The decision is now at-hand, “exit or hold until after earnings?”
Future of Nvidia…..
Nvidia earnings report is expected to be poor, but, despite this there are some positive signs that could help Nvidia achieve strong financial results in the future. One of the positive developments is the Nintendo Switch Lite, which should generate substantial early revenue for Nvidia.
On a positive note, Nintendo has recently reaffirmed its 18 million sales targets for 2020, and the addition of the Nintendo Switch Lite shows that Nintendo believes the device will hold up strong amid the ongoing trade war.
However, there is not likely to be meaningful bullish trends until Nvidia releases its 7nm a100 chip. The 7nm chip could come late this year, but don’t be surprised if it comes in the first half of 2020.
Another way to view Nvidia is “as a pure and levered way to invest in the future prospects of the GPU.” Of Nvidia’s four key markets (Auto, Datacenter, Gaming, and PC), all of them except for the PC market should experience growth that surpasses the semiconductor market by 3x. With such a unique growth opportunity in almost all of Nvidia’s key businesses, the stock is worth considering positively amid some short-term headwinds.
Wall Street is generally bullish on Nvidia with an overall rating of Buy. Out of 44 analysts, 26 are bullish on Nvidia stock, 15 have given a hold rating, and three are bearish on the stock. The average price target stands at $194.34, which represents about 30% upside from the current share price.
What can you do?
As there is still a bullish theme surrounding Nvidia based on the long-term, you may wish to consider the following options trade…..
Option trade to consider: Buy the NVDA JUN 19 2020 150.000 CALL at approximately $22.00.
PATIENCE PAYS OFF!
If you are interested in receiving more trades similar to this and being part of the profitable action enjoyed by members just CLICK HERE.
AS ALWAYS THE DECISION IS YOURS!
When To Exit A Trade Based On Earnings?.....
It is also worth considering, when options trading earnings reports – “Do we exit on already existing profits or leave the companies to report their earnings and hope for bigger profit?”
As most traders realize, there is a 50/50 chance that the company stock price could go either way after reporting earnings – even if the report is good, the stock price could reverse – and if you hold a call option, means depletion of an already good profit if it exists. A similar situation can be found if you hold a put option, and a report is not that sound (and you expect a profit from this) but the stock price can, at times move upwards due to traders bias or other external conditions......READ MORE.....
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!