Nvidia reports earnings and guidance after Wednesday's close next week, and Bespoke Investment says the chipmaker may need to top its usual strong results to lift shares. Bespoke counts 14 triple-play quarters among Nvidia's last 20 earnings reports, yet the stock fell on the day of each of the last three. Option traders are pricing a 5.3% swing in Nvidia's stock by next Friday's close, equal to roughly $562 billion in market value.
Nvidia's report carries outsized weight
Nvidia releases its earnings and guidance after Wednesday's close next week, a report that carries outsized weight for the wider market. The company carries a market capitalization of $5.26 trillion, the largest of any company in the market.
It also holds a 7.6% weighting in the S&P 500, so its results can move the broader index. Nvidia also ranks second on Goldman Sachs' list of hedge funds' most important positions, behind Amazon.
Option traders are pricing a move of plus or minus 5.3% in Nvidia's stock through next Friday's close. That range spans about $562 billion in market cap, based on MarketWatch calculations using FactSet data.
Cheap valuation, but a stubborn trend
A positive for Nvidia investors: shares haven't seen the kind of pre-earnings surge that could invite profit-taking even on good news. Since the company's last earnings report, the stock has gained only about 1%. It also looks relatively cheap by historical standards, with its next 12-month price-to-earnings ratio near 20, down from a five-year average of 63, according to FactSet.
Yet Bespoke flags a problem. According to Bespoke: "a triple-play king" — a company that consistently beats earnings-per-share and revenue estimates while raising guidance. Nvidia has completed 14 triple plays in 20 quarterly reports over the past five years. However, on each of its last three triple plays, shares finished down on the day.
Bespoke suggests Nvidia may need to do more than simply repeat a triple play to spark a post-earnings rally this time.
Source: MarketWatch
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