NVIDIA Shares Ease After Topping Earnings ForecastsNVIDIA shares slipped in Wednesday’s extended-hours trading session despite the chipmaker surpassing Wall Street’s top and bottom line expectations. Here’s why.
NVIDIA Corporation (NVDA) shares slipped in Wednesday’s extended-hours trading session despite the chipmaker surpassing Wall Street’s top and bottom-line expectations.
The Santa Clara-based company posted a first-quarter profit of $3.66 per share, easily exceeding analysts’ expectations of $3.28 a share. Meanwhile, revenue for the period came in at $5.66 billion, with the figure coming in comfortably ahead of the $5.41 billion consensus mark and growing 84% from a year earlier on the back of a surge in demand for graphics chips driven by pandemic gaming. Moreover, the company said it expects sales in the current quarter to increase 62% from a year ago.
Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary. A Product Disclosure Statement (PDS) can be obtained either from this website or on request from our offices and should be considered before entering into a transaction with us. Raw Spread accounts offer spreads from 0.0 pips with a commission charge of USD $3.50 per 100k traded. Standard account offer spreads from 1 pips with no additional commission charges. Spreads on CFD indices start at 0.4 points. The information on this site is not directed at residents in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
However, news that supply issues look like continuing for the foreseeable future spooked investors. “We expect to remain supply-constrained into the second half of the year,” chief financial officer Kress said, per MarketWatch. The company said it planned to manage the shortage by adding software to deter cryptocurrency miners from using its gaming chips. During the quarter, processing chips designed specifically for digital currency generated $155 million in revenues.
Through Wednesday’s close, the NVIDIA share price has a market capitalization of $391 billion, offers a tiny 0.10% dividend yield, and trades 20.26% higher on the year. By comparison, the tech-heavy Nasdaq index has gained 6.59% over the same period. From a valuation standpoint, the stock trades 24% above its five-year average forward earnings multiple of 36.69 times.
Wall Street View
Susquehanna’s Christopher Rolland reiterated his ‘Positive’ rating and $700 price target after Nvidia’s quarterly report. Rolland told investors that demand for the chipmaker’s GPUs remains robust, but he sees sales slowing in the second half of the year as reopenings and physical activities resume across the United States.
Broker coverage remains firmly in the bull camp elsewhere on Wall Street also. The stock receives 29 ‘Buy’ ratings, 5 ‘Overweight’ ratings, 4 ‘Hold’ ratings, 1 ‘Underweight’ rating, and 1 ‘Sell’ rating. Twelve-month price targets range from a Street-high $800 to $380 low, with the median pegged at $675.
Technical Outlook and Trading Tactics
NVIDIA shares have traded within a $175-point range since early September, with the bulls nor the bears able the take control of price action.
Given Wednesday’s after-hours weakness, active traders should consider opening a short position near the trading range’s upper trendline resistance area at $645, while looking to cover near the range’s lower trendline at $470. Protect capital by exiting the trade if the stock breaks out to a new all-time high on above-average volume.
For a look at today’s earnings schedule, check out our earnings calendar.