NVIDIA Earnings: Will They Matter?
It seems like a silly question but let me phrase it to you in a couple of different ways. NVIDIA’s earnings will be a market-moving event, there’s no doubt about that. But will the numbers even matter? Or has NVIDIA’s stock already climbed as high as it can for now? On the other hand, the S&P 500 is already near its all-time high price and much of it was carried by NVIDIA’s recent rally. How much more can the indexes rise from another NVIDIA blowout quarter?
If you think I sound bearish on NVIDIA (NASDAQ: NVDA), I’m not. In fact, I firmly believe NVIDIA will continue to be one of the world’s most valuable and powerful companies for years to come. We could very well be in an AI bubble right now, but there is genuine demand for AI chips and software, which NVIDIA is providing nearly 80% of the market’s supply. You might not agree with NVIDIA’s stock price, but there is no doubting the impact it is having on one of the world’s fastest-moving industries.
So I ask you again: Will NVIDIA’s earnings matter? Let’s examine the bear and bull case for NVIDIA’s earnings next Wednesday.
NVDA Earnings Preview: Bull vs. Bear
The bull case is easy: NVIDIA continues to see massive sales growth and demand for its chips. Earnings are expected to come in at around $4.59 per share with revenue of $20.37 billion. For earnings, that represents a 422% year-over-year growth while sales will grow by 237% since last January. That is legitimate growth, especially for a company already valued at $1.79 trillion.
There’s more to the bull case. No matter how high NVIDIA has risen its sales multiple keeps in line with its stock price. We’ve also seen bullish option flow for the stock and a ton of analyst upgrades. Wall Street is legitimately behind NVIDIA and so it does have a decent chance of continuing to defy the odds.
The bear case for NVIDIA revolves around its stock price. We saw the damage that SMCI (NASDAQ: SMCI) took on Friday when it fell by nearly 20% in a single session. I’m not comparing the two companies but NVIDIA’s stock has risen in a parabolic fashion similar to SMCI.
You can also argue that all of NVIDIA’s short-term growth has been priced into the stock already. In cases like this, no matter how well NVIDIA does on its report, it can sell off as investors take profits from the recent rally.
How am I playing NVIDIA’s earnings? With premiums so high it’s hard to really choose a side on this one. I have full confidence in Jensen Huang putting forth another impressive quarter. One last ace up his sleeve could be the mention of a stock split. Every time NVIDIA’s stock has risen to these levels, the company has not been shy about splitting its stock. If I were to bet on the earnings, I’d buy an at-the-money put option. But if rumours of a split come up ahead of the call, I’d go all in on calls and buy myself some common shares as well.
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