Nvidia Earnings Questionable?

by Ian Harvey
August 12, 2019

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NVIDIA Corporation (NASDAQ:NVDA)

Nvidia earnings will be reported after the market closes on Thursday, August 15, 2019. The consensus earnings estimate is $1.14 per share on revenue of $2.55 billion; but the Whisper number is slightly higher at $1.18 per share.

The maker of graphics and high-performance computing chips's guidance was for earnings of $1.08 to $1.22 per share. Consensus estimates are for earnings to decline year-over-year by 35.59% with revenue decreasing by 18.35%.

For the last reported quarter, it was expected that Nvidia earnings would post $0.82 per share when it actually produced earnings of $0.88, delivering a surprise of +7.32%.

Semiconductors have struggled in the wake of the trade war. A prolonged trade war between the U.S. and China poses a serious threat to global growth, which in turn could lead to a big drop in chip demand. NVIDIA shares have been on a roller-coaster ride in recent months, with those swings reflecting the chip giant's leverage to volatile market forces like Chinese trade strategy - it accounts for around 25% of its revenue - and cryptocurrency demand.

YOU NEED TO BE IN TO PROFIT!

That is the fear on Wall Street and why NVDA stock has hovered in the lower end of its 52-week range for most of the year.

Shares of the graphic chip powerhouse, which has delivered twelve consecutive beat-and-raise quarters, have been punished during the recent tech selloff, falling 10% over the past three months, while plunging 40% over the past year.

Near-term expectations…..

For the near-term several factors will probably see CEO Jensen Huang and his management team issue a cautious outlook for the fiscal third quarter on Thursday afternoon. These factors include;

  • shifts in demand for  new gaming laptops,
  • changing sales trends in the data center business,
  • new emerging niches like artificial intelligence and autonomous driving,
  • plus the impact of trade disruptions, and the associated unknown future development.

Influencing factors for Nvidia earnings…..

NVIDIA earnings will still faces obstacles in the short term, including a slowdown in data center spending. Also, sales of gaming laptops, which have been a bright spot for the business segment, will be hampered next quarter due to a shortage in central processing units (CPUs) in the PC market. 

NVIDIA stock has already bounced back by 28% year to date. That puts the forward valuation at 32 times this year's consensus earnings estimate. The high earnings multiple may not leave much upside for the shares in the short term, especially as the data center segment is still in a slowdown phase, and AMD's new GPUs are expected to take some market share from NVIDIA.

Overall Nvidia earnings estimates have been revised lower since the company's last earnings release. The consensus EPS estimate for the quarter has been revised 1.98% lower over the last 30 days to the current level.

Analysts’ views…..

BidaskClub lowered shares of NVIDIA from a buy rating to a hold rating in a research note issued to investors on Saturday, August 3rd.

Several other equities analysts have recently commented on the company…..

  • Summit Insights lowered NVIDIA from a buy rating to a hold rating and set a $158.57 target price for the company in a research report on Friday, May 17th.
  • UBS Group cut their price target on NVIDIA from $210.00 to $195.00 and set a buy rating on the stock in a report on Friday, May 17th.
  • Summit Redstone downgraded NVIDIA to a hold rating in a report on Friday, May 17th.
  • Cascend Securities raised NVIDIA from a hold rating to a buy rating and set a $190.00 target price on the stock in a research note on Thursday, July 11th.
  • Finally, DZ Bank downgraded NVIDIA to a sell rating and set a $170.00 target price on the stock in a research note on Friday, April 12th.

Three equities research analysts have rated the stock with a sell rating, fifteen have assigned a hold rating and twenty-six have given a buy rating to the company. The stock has a consensus rating of Buy and a consensus price target of $187.00.

What can you do?

Chipmakers have been caught in the crossfire of the ongoing trade war with China. In just the last five days, Nvidia Corporation share prices have fallen 4%. If further escalation occurs, investors fear that this decline will only intensify as Nvidia has significant business interests in China.

The reality is that Nvidia stock is probably a great long-term play and has incredible potential given that it is a leader in artificial intelligence - and it could experience substantial gains down the road.

But for the short-term, Nvidia’s upwards movement is questionable!

If you agree with this scenario you may wish to consider the following options trade…..

Option trade to consider: Buy the NVDA SEP 20 2019 150.000 PUT at approximately $7.50.


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!


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!


Best of Trading,
Ian Harvey
Director of Stock Options Made Easy


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