STOCK TALK

Stock Talk: NVIDIA Earnings

My thoughts on NVIDIA earnings.

NVIDIA will report their earnings for this quarter on August 19th after hours. If you’ve been following this stock market this past year, then you should realize that most of the stocks that tanked back in March, are now valued at an even higher price than before. *Cough Apple, Tesla, & Amazon* Since then, our stock market has suspiciously been better than ever and has quickly “recover” since the March panic.

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Indeed, these have been confusing times. With unemployment rate high and the rapid spread of COVID-19, stocks only continue to go up. With all that said, let’s get right into NVIDIA. As you might be aware, NVIDIA is a company that focuses on designing graphics processing units (GPUs) for markets. Think of it as the brand name of Graphics Cards. NVIDIA will always be priced much more expensive than its competitor AMD because of their name and quality of their products. Simple as that. Anyways, since its past earnings on May, NVIDIA has risen roughly 40%. Their market cap is about to top $300 billion and who knows, after tomorrow they might be valued at $500 per share.

NVIDIA is most certainly going to beat earnings. If AMD beat earnings, then it shouldn’t be too hard for NVIDIA to do so. Most of the success comes from their sales of GPUs and console processors. However if they don’t (since they have high expectations), then it’s a surprise for sure. “According to Zacks Investment Research, based on 8 analysts’ forecasts, the consensus EPS forecast for the quarter is $1.63.” (NASDAQ)

Screen Shot 2020-08-19 at 1.50.07 AM
NVIDIA EPS provided by Nasdaq

NVIDIA has been on a roll since their May earnings. Back in June, they announced a partnership with Mercedes-Benz to build “software-defined computing architecture” for their cars. NVIDIA is basically going to help the AI automation for their cars starting in 2024.

However, one concern that I have is that NVIDIA is possibly too overpriced. If it breaks the $500 mark, its market cap is about to become bigger than before. Just take a look at Apple and Tesla. Both of those stocks are overpriced. There is no reason for Apple to be at $460 range and for Tesla to be at $1900 range. What happens when a stock is too overvalued? What do they do? Stock split. I won’t be too surprised if NVIDIA follows Apple and Tesla’s footsteps when they announce a stock split. If that does happen, I see a 3-1 or a 4-1 stock split bound to happen. And yup you guess it, it’ll probably take place a week after Tesla’s split.

Overall there’s no doubt that NVIDIA will do well on its earnings considering its history. We should expect some crazy announcements and maybe even another partnership with a huge company. MY personal assumptions are that:

  • 1. NVIDIA will kill its earnings
  • 2. Price won’t stay until Thursday PM, it might tank
  • 3. Break the $500 price mark
  • 4. New partnership
  • 5. Possible acquisition of a company
  • 6. Stock split

Take all of this with a grain of salt. These are just my personal assumptions. I might gamble NVIDA earnings by buying couple shares. Definitely not going to play options this time since the IV crush is pretty high for some OTM & ATM calls.

Sources:

https://www.nasdaq.com/market-activity/stocks/nvda/earnings

https://nvidianews.nvidia.com/news/mercedes-benz-and-nvidia-to-build-software-defined-computing-architecture-for-automated-driving-across-future-fleet

https://www.barrons.com/articles/nvidia-reports-earnings-wednesday-heres-what-to-expect-51597660200

https://www.investors.com/research/investing-action-plan/nvidia-earnings-eye-switch-boost-more-retailers-report/

 

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