Nvidia (NASDAQ:NVDA) is stepping up to the earnings confessional plate this week. While some stocks have tumbled this earnings season, NVDA stock is well-positioned to knock it out of the park for investors.
Let me explain.
In a year like 2020 it’s easy to lose track of earnings season. A contentious Presidential Election. Almost daily “ALL CAPS” voter fraud allegations vis-à-vis the president’s Twitter feed. Surging cases of the novel coronavirus across the globe. A new wave of lockdown orders. Pfizer’s (NYSE:PFE) promising coronavirus vaccine news last week. Monday’s even more favorable drug update from Moderna (NASDAQ:MRNA).
Yup, investors are rightfully excused for forgetting.
But for semiconductor chip giant Nvidia, earnings tomorrow evening may trump all of the macro noise rightfully vying for investors’ attention. Wednesday night’s Q3 report from Nvidia is expected to yield earnings of $2.58 per share.
The profit bar has been raised fairly high with the analyst community upping its estimates from $2.19 at the beginning of the quarter. The bullish revision is also well-above last year’s same quarter result of $1.78 per share.
Sales expectations are similarly confident for Nvidia. Consensus views are forecasting revenue of $4.41 billion compared to prior estimates of $3.97. The outlook is also set to top 2019’s $3.01 billion and pegs sales growth a whisker away from 46%.
The enthusiasm may be bit tough to swallow for a company of Nvidia’s size. Shares do sport a market cap approaching $350 billion. But there’s plenty of reasons behind it too. Nvidia’s chips reach dominantly across growth industries: Gaming. Data centers and the cloud. AI and machine learning. Autonomous driving. There’s even a reemerging cryptocurrency space to consider, as well as the mobile device market which Nvidia just entered during the third-quarter.
To be fair, not everyone is a fan of Nvidia at its current price. The stock does look expensive. But it’s also true select growth stocks can remain out of reach for much longer stretches than value investors dare admit. And right now, NVDA’s prospects look poised for a bullish earnings-driven jumpstart based on what we’re seeing on the stock’s price chart.
NVDA Stock Weekly Price Chart
Source: Charts by TradingView
I’ve said it before, but it bears repeating. Even the best stocks correct. What’s more, it happens in the healthiest of markets too. Now, as the S&P 500 and Dow Jones Industrial Average hit fresh all-time-highs, large-cap technology market leaders Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Tesla (NASDAQ:TSLA), Netflix (NASDAQ:NFLX) and others have continued to lag. And Nvidia hasn’t been immune.
The good news for NVDA stock investors is most corrective phases don’t go into or become prolonged bear markets. And following a fairly large 1.5-year cup-shaped bear market which completed in 2020, today’s demonstrated relative weakness looks more compelling as a spot to pick up Nvidia on weakness. What’s more, given how conditions are really taking shape on the Nvidia price chart, those prospects look even more compelling today.
With Nvidia shares known for their post-earnings volatility and the past couple months of softer price behavior developing into a bullish ‘W’ or high-level double bottom base, its anticipated volatility’s double-edged sword will work to the advantage of Nvidia stock in the report’s aftermath. This will propel shares to a breakout and new all-time-highs.
For readers with positive expectations for its earnings report and a positive longer-term assessment of Nvidia as an investment, a stock collar is a favored risk-adjusted position that makes sense. That may be particularly true if, maybe like InvestorPlace.com’s Mark Hake, you also see Nvidia’s current pricing is rich and you want to buy shares after an even larger corrective cycle, which respectfully, may or may not, make today’s cautioned assumptions look prescient.
No stocks owned: On the date of publication, Chris Tyler did not hold, directly or indirectly, positions in any of the securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.