Prelude to Nvidia Earnings.....
Nvidia earnings will likely be caught up in a fresh slump in the world’s most-watched stock indexes, as economic growth
fears spiral and the Federal Reserve embarks on its biggest policy-tightening
campaign in decades.
Last week we
saw the S&P 500 flirting with a bear market and notching more than $1
trillion in losses. This is likely to continue this week with NVIDIA earnings report,
as well as reports from well-known retailers including Dollar General
Corp., Best Buy Co Inc., Macy’s Inc. and Costco Wholesale Corp., still to come.
The Fed’s hawkish-at-all-costs
posture, the chaos in supply chains and intensifying threats to the business
cycle are all undermining confidence in Corporate America’s profit machine,
while equity valuations keep sinking.
“I still think the worst is not behind us,” said Savita Subramanian, head of US
equity and quantitative strategy at Bank of America Corp., on Friday. “There’s a pervasive fog of negative
sentiment out there.”
profit assessments from the likes of retailer Target Corp. and
network-equipment company Cisco Systems Inc. saw investors take the ax to share
prices last week. Short interest in a popular exchange-traded equity fund
jumped near levels last seen in March 2020.
in consumer stocks reached levels not seen since the early days of the
pandemic-driven rout as retailers from Walmart Inc. to Target Corp. cut their
annual profit forecasts and stoked concern over the impact of rising inflation
and the challenge to pass on higher costs to consumers.
“The implications for retailers that have yet to
report are not promising,” said John Zolidis, president of Quo Vadis Capital, after Walmart and
Target’s bleak updates. Several brokerage firms, including Truist Securities
and Oppenheimer, have trimmed profit expectations for retailers that have yet
to release quarterly results.
Shares of NVIDIA
remain mired below the 50-day moving average as well the 200-day
average. It also sits below a falling 21-day exponential moving average. The
chip stock has erased all gains from a successful October breakout and has
fallen near a 52-week low.
fundamental level, Nvidia earnings and sales are expected to keep growing,
though at a less torrid pace than seen in recent years.
chipmaker is expanding in growth areas, such as data centers, automated cars
and cloud gaming. The adoption of metaverses and cryptocurrencies could further
stoke demand for Nvidia chips.
new gaming chips underscore Nvidia's continued dominance in core markets.
However, challenges from rate hikes, economic uncertainty and the Russian invasion
are growing. China's slowdown is a new worry.
NVDA is a
top chip stock, but the semiconductor sector is badly lagging in recent weeks.
NVDA stock remains below key support levels and has a lot of recovery work to
are due Wednesday but Susquehanna analyst Christopher Rolland cited declining
selling prices for Nvidia's graphics processing units (GPUs) designed for
playing video games on a PC, which presents near-term risk to one of Nvidia's
largest sources of revenue.
The Major Catalysts for the nvidia earnings Weekly Options
Corporation is expected to report earnings on May 25, after the market closes.
The report will be for the fiscal Quarter ending Apr 2022.
Based on 11
analysts' forecasts, the consensus EPS forecast for the quarter is $1.09. The
reported EPS for the same quarter last year was $0.78.
latest quarter, Nvidia earnings leapt 70% year over year while sales climbed
53%. Both earnings and sales growth accelerated from the prior quarter.
2023, analysts expect EPS to jump 27% as revenue increases 29%. While strong,
that would be well below the scorching pace of growth seen in 2021 and 2022.
Both earnings and revenue are seen growing further in 2024, but at a slower
of slowing growth in China hurt Nvidia stock May 16. The company derives more
than half its revenue from mainland China and Taiwan, according to FactSet.
chip giant might face order cancellations as demand for graphics processing
chips is weakening, R.W. Baird analyst Tristan Gerra reportedly wrote in a note
to clients April 11.
order cancellations recently started in consumer GPUs, driven by excess
inventories, a slowdown in consumer demand (reflected by an ongoing reduction
in graphic cards pricing), slowdown in PC demand, and the Russia embargo,"
warned. Gerra also believes demand has fallen in China.
reports have suggested weakness in PCs and consumer electronics amid high
Nvidia has benefited from soaring demand for advanced
computing applications, including data center operators buying high-powered
graphics chips to process large data workloads with artificial intelligence.
But gaming is still the company's largest segment. Last year, gaming revenue
totaled $12.4 billion, growing 61% year over year.
Nvidia's GeForce RTX 30 series and Advanced Micro Devices' Radeon
RX 6000 series had been trending up through 2021, but since the start of 2022,
GPU prices have started to decline.
Thoughts on Nvidia Earnings.....
not substantially raise its financial forecasts or turn in higher earnings than
expected for the first quarter due to weakness in its gaming-chip business,
according to Susquehanna analyst Christopher Rolland.
who lowered his price target on the stock, said the reopening of the economy,
giving people more entertainment options, has led to a slowdown in the
videogame-chip business. He said in a research note Wednesday that the mark up
over the suggested retail price for Nvidia ’s cards has declined from a high of
more than 130% in mid-2021 to over 78% in January, and 23% currently.
kept a positive rating on the stock but lowered his target for the price to
$280 from $320.
for the gaming segment is less clear as businesses and economies start
reopening, Rolland said. It “presents a
potential intermediate-term narrative risk going into the quarter,” he
not the first analyst to issue a warning over Nvidia's gaming segment. A few
weeks ago, research analysts at Morgan Stanley also cautioned
investors about a possible deceleration of growth in gaming.
noting that both Susquehanna and Morgan Stanley are bullish on Nvidia's
long-term prospects. Plus, Nvidia shares have already fallen 50% from their
all-time high of $346 in 2021. It seems investors were already expecting a
slowdown in growth this year.
NVDA has nearly halved from its November
2021 peak. It tumbled in a broad tech-led sell-off that was sparked by fears
about rising inflation and interest rates.
The relative strength line for NVDA
stock shows significant lag.
Nvidia has a 50-day moving average price
of $222.01 and a 200 day moving average price of $255.96. NVIDIA Co. has a 52-week
low of $135.43 and a 52-week high of $346.47. The company has a quick ratio of
6.05, a current ratio of 6.65 and a debt-to-equity ratio of 0.41. The firm has
a market capitalization of $493.36 billion, a PE ratio of 44.02, and a PEG
ratio of 2.23 and a beta of 1.59.
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