NVDA earnings response - perplexing

Wow a big beat and it’s further down AH. Weird.

Nvidia (NASDAQ:NVDA): Q2 EPS of $1.01 beats by $0.31.

Revenue of $2.23B (+55.9% Y/Y) beats by $270M.

Google finance says:
After Hours: 154.04 -10.70 (-6.50%) after already being down 4% today.


Hope it stays that way. Will add in the A.M.

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Conference call at 5 ET.

In 25 minute.


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The primary issue, as far as I could tell, was a combination of three things.

First, Andrew Left slammed the stock on the news about an hour before the stock market close, when he had a short position in it.

Second, while the guidance did definitely beat estimates, much of the stock price already had that baked in, analysts were expecting that they would beat guidance, but ultimately NVDA didn’t beat guidance as much as Mr. Market thought it would.

Third, it appears that the same group of people that shorted Apple pretty hard targeted NVDA in aftermarket hours.


NVDA is by far my biggest holding after entering my position in late 2014 for about $18/share.

Before the prior quarterly earnings announcement, NVDA had been mostly trading between $100 and $110 per share, shot up to a bit over $120/share the morning after the quarter’s announcement and has marched higher and higher for the most part since. I actually sold a portion of my position yesterday at $172/share as I didn’t see any way that this quarter could move the needle upward. I actually agree with Andrew Left about NVDA going to high too soon. Even with today’s beat, ~$5 of EPS for this year would have been about a P/E of about 35 for a $175 share price, with a P/S of over 10x…that’s probably a bit too high.

I very well may buy back the number of shares I sold earlier this week and maybe even more, pending what the share price does over the next week or so. I need to go read the actual numbers, particularly the checking the auto and data center revenue growth as part of my decision-making research.


I’m long and heavy NVDA. I fully expect the short term holders to get bored and leave over the next few months. If it drops substantially, I’ll most likely buy a little more.


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I have not even looked. No reason to look. With the market fearing North Korea my go over the top, and that Trump might follow through on comments that if North Korea does fire symbolic missiles at Guan, that something could break out, the amrevkt is not going to do anything but go wild with gyrations.

Those who would know best are in South Korea, and South Koreans seem to have no fear either way. And the only result is the end of the North Korean regime (an the follow up mess), and whatever “collateral” damage and instability that may create, which would be transitory, but could potentially be very costly in lives.

I believe this concern is overblown, but the market obviously is concerned enough.

Given this, why even both to check out one’s portfolio. I still remember 9/11 and (no it was not the first thing I thought about, and honestly I didn’t care at the time) but my portfolio took a nasty hit. I had no idea back then if it would ever come back. Such was the mood at that time.

Looking forward. YES, Nvidia reported awesome and better than even optimistically expected earnings. Doesn’t matter. Nvidia was likely to go down anyways. Why? Too many brokers with headlines stating “buy Nvidia ahead of earnings, they will beat.” Same thing happened to Twilio last quarter. Nvidia fundamentals are better than even optimistic expectation.

TTD. TTD is focusing a big portion of its business in Asia. By all right, TTD should have taken a bigger hit than even Nvidia (true though, Nvidia is practically out of business if something blows up Asia). So I retract this qualitative statement.

But for whatever reason, TTD is as well on a roll. The type of roll, that recently, we have only seen with a company like SHOP, and the sort of blow out quarters we use to see with Qualcomm, Cisco, EMC, that sort of thing.

As such, as Saul often says, I am following the fundamentals here because it is rare to see fundamentals on this sort of positive scale. Stock price reacts to more than just fundamentals, and we all know this. But fundamentals set stock prices over the longer haul (forward looking perceptions of fundamentals).

Conclusion: SHOP, NVDA, TTD seem like quite the trio to hold and adding to monthly still seems like quite the plan.



Conclusion: SHOP, NVDA, TTD seem like quite the trio to hold and adding to monthly still seems like quite the plan.

Ha! I bought more SHOP, more TTD and my initial tidbit of NVDA. The first two were regular hours and the last in the after market.

Matter of fact, I bought more TTD twice today before the bell.

Sure, the market may correct and is likely due as things have been quite complacent for a while. I’ve only seen the headlines from TTD and NVDA, but they appear very impressive. And we know SHOP was incredibly impressive.

Geopolitical events aside, the economy seems to be doing well right now and so are many of the companies we invest in. Yes, I realize a Black Swan may swoop in at any time and poop on our parade, but by and large, things are going pretty well.

Take care,

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Nvidia’s share price action reflects I guess:

  1. The SP stretched valuation in spite of the results
  2. Sell and short calls during the day from commentaries
  3. Go forwards guidance not beating enough to justify the prospective valuation which will face tougher compares as well and see a fall in growth rate to sub 20%.
  4. Concerns over cryptocurrency mining demand coming to an end
  5. Still over reliance on the GPU and gaming + crypto currency segment
  6. Potential revitalised competition from AMD and Intel in GPU
  7. Relatively slow growth in Automotive & Progessional Visualisation
  8. Despite growth rates - the inability for OEM to move the needle relative to the size of its GPU/Gaming segment

I thought there was interesting hope though in the Data Center space which is becoming significant enough to actually move the needle and growing beyond all expectations. This should be at higher margin too. Finally we have ARM servers competing with Intel (which will drive a competitive reaction).


My theory about NVDA - extreme exceeding of analyst estimates was baked into the price before the drop.

This would be a good “textbook” stock to calculate intrinsic value based on expected future growth, cash flow, etc.

Sold the Sept 185 Call for a nice chunk of change. So, I don’t mind the beat down for now.