It came late in the season. The top-performing stock of the year would report the financial performance of the second quarter. Expectations would be high.
Nvidia (NVDA) is the elite of its sector. Artificial intelligence. Machine learning. The graphics. All leading to dominant positions in the data center (the cloud), and in gaming. Oh, there are other rows of companies. However, they are smaller, if relatively speculative. Investors may consider professional visualization and / or automotive, but the company may hit or miss in those spots, and perhaps leave no stone unturned.
The big two business segments are what counts most of this name. They could not, and they did not disappoint.
In Tuesday’s Market Recon column, we suggested taking a little off long positions for the numbers. The stock just plummeted to $ 500 this morning. Hope some readers pay attention. The intention is to return the shares to the position after the extraction of some capital.
I see NVDA stocks trading above a $ 480 handle early Thursday morning. I’m not sure I trust the stock to get in much further. Sure, there is some talk that Nvidia might be trying to get ARM Holdings from Softbank. That will take some days, which Nvidia certainly has access to, but will probably push the share price down at first glance. Then again, Nvidia will be hosting a special “GeForce” event on September 1st. Hard to imagine anything positive coming out.
I would think, even if a little shy, at least a few of those shares would recover on this discount, even at ratings at 62 times subsequent gains of 12 months. This name does not act as traditional metrics. It trades on stream.
The numbers
For its fiscal second quarter, Nvidia reported adjusted earnings of $ 2.18 per share, a beat of more than $ 0.20, and good enough for year-over-year growth of 76%. Revenue grew even 50% to $ 3.87 billion, well ahead of expectations.
Top dog this quarter for Nvidia was the Data Center. That business contributed $ 1.75 billion to the whole, prior to consensus and became the company’s largest company in the process. Gaming lost consensus, landing at $ 1.65 billion. Adjusted gross margin as a whole also hit the Street consensus, at 66%. Wall Street was looking for 64.5%, but the 66% mark complied with Nvidia’s own guidance.
The interesting bit of information that is released here is the new guidance. It seems that Nvidia does not believe that the great performance across its two dominant business lines would have been organic and not been drawn in terms of demand due to the pandemic. As far as the Data Center is concerned, this is somewhat out of line with comments made by competitors suggesting a delay of the second half due to reduced business expenses by customers.
For the third quarter, Nvidia expects to post revenue of $ 4.4 billion, give or take 2%. Wall Street consensus is currently just under $ 4 billion for this number. Playing, which is entering the holiday season, with many people still sitting indoors as the weather gets colder, it is expected to grow 25% over quarter. Growth in the Data Center is expected to grow more slowly, in the low to medium numbers.
In principle. The reported quarter and the expected quarter are both great, in my opinion.
The Chart
Has Nvidia been extended since the breakout of May? For sure.
Has the Pitchfork, since the bottom of March, been in place in such a way that it is unsustainable? Probably.
That said, I hope today to see levels around $ 450. I will start adding the shares sold earlier immediately after this article comes on publication. Then I will wait to see if my instincts were correct.
If all goes well, I will double my current position to $ 410. Getting that chance would actually surprise me.
(Nvidia is a member of Jim Cramer’s Action Alerts PLUS member club. Would you like to be warned before Jim Cramer buys or sells NVDA? Learn more now.)
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