NVIDIA Trading Modestly Higher After Earnings

NVIDIA Corp. (NVDA) shook off a modest decline in Wednesday’s post-market and is trading higher by more than 1% on Thursday morning, after investors took a more bullish view of the mostly inline Q2 2021 earnings report. The chipmaker posted a profit of $1.04 per-share during the quarter, just $0.02 better than expectations, while revenue rose an impressive 68% year-over-year to $6.51 billion, about $170 million higher than consensus.

Warning on Supply Constraints

Vertical industry and hyperscale customers generated record data center revenue. Demand for gaming chips also underpinned results, outpacing supply due to the worldwide chip shortage. The company warned that “we will see a supply constrained environment for the vast majority of next year”, raising a red flag for industry rivals. Automotive revenue declined sequentially, as the self-driving juggernaut ran into the impenetrable wall of limited supply.

NVIDIA posted an historic 221% return in 2020 and has added another 49% so far in 2021. Supply constraints haven’t impacted the bullish technical pattern, at least yet, but it will be hard for risk conscious investors to take exposure until mean reversion takes control and prices drop off lofty levels. Even so, there’s little doubt the company is destined for long-term market leadership, given its amazing track record since 2016.

Wall Street and Technical Outlook

Wall Street consensus has declined to an ‘Overweight’ rating in the last three months, based upon 28 ‘Buy’, 6 ‘Overweight’, 4 ‘Hold’, 1 ‘Underweight’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $130 to a Street-high $300 while the stock is set to open Thursday’s session about $26 below the median $220 target. The modest buy-the-news reaction suggests that price can now ease toward the $200 level.

NVIDIA broke out above the 2018 high at a split-adjusted 73.19 in May 2020, entering a powerful uptrend that stalled just below 150 in September. The stock cleared resistance in April 2021 but momentum didn’t kick into gear until a May buying spree added 74 points into July’s all-time high at 208.75. Mixed weekly and monthly Stochastics readings since that time indicate that price has entered a trading range that could persist well into the fourth quarter.

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Disclosure: the author held no positions in aforementioned securities at the time of publication.