This is the key to an earnings rally - apparently, analysts tone down their estimates for FQ1, allowing NVDA an easier time of beating those expectations. Instead of being a normal, boring month, May contains an earnings report for a quarter that is not overly hyped. The NVDA earnings beat pattern is slightly lower than this probability, but it converges when we consider this quarter alone. In addition, this month is one of the most reliable ones, ending in the green three out of every two Mays. May, for NVDA, provides a significant upside with a downside comparatively low to its other months. Thus, I always like to look at excess returns in a specific month and consider it along with the risk profile. Until the tech industry becomes a value, not growth, industry, this is a fact that we must learn to deal with. In the tech industry, high historical gains skew the expected gains that the math tells us we will get if we hold for a specific time. What is the advantage of playing earnings on a weaker quarter and when short interest has fallen? NVDA's seasonality gives a possible answer: The traders who previously shorted NVDA into earnings have taken note and gone into hibernation: The stock moves almost in tandem with EPS growth. Some daft stock prediction services emphasize EPS when it should be downplayed, but for NVDA's case, EPS is extremely important: A connection of this sort is not exactly common in the tech sector where hype alone can drive a stock to diverge with earnings growth. NVDA remains one of my favorite tech stocks for earnings plays because of the strong relationship between earnings and stock price. Nevertheless, looking at NVDA from a longer term perspective, the stock is about to show investors an all-time high annual EPS: The next earnings report is on May 9:įiscal quarter 1 is seasonal quarter 2 and is seasonally one of NVDA's weaker quarters: While NVDA always has been a popular request in Exposing Earnings, it seems that FQ1 brings the most attention. Now, I'm receiving emails to look at NVDA once again before its FQ1 earnings report.
( You can read the full analysis and trade prediction here.) The earnings play went as planned, and everyone was happy. I therefore recommended a long position, and NVDA rallied hard: 15% on earnings day, and 22% over the following week. However, after an in-depth analysis, I determined that NVDA would likely rally, not fall, on earnings. After all, short interest was increasingly quickly, and NVDA had been growing to where investors saw the stock as overbought.
Many of my subscribers who were long on the stock were worried that NVDA would sell off on earnings. Just one year ago, Nvidia (NASDAQ: NASDAQ: NVDA) was the number one requested stock for Exposing Earnings.