Nvidia, Disney, Roku Earnings Preview For the Week of May 7
Michael Kramer and the clients of Mott Capital own shares of DIS, GOOGL, AAPL, MA, and TSLA
Earnings Scorecard for this blog :
The scores above are for the blog only, because for some reason my calls on Investopedia have been much better. I couldn’t tell you why, but that is just the way it goes. So I’m sure there are plenty of people that will make comments, and laugh at my miserable results. But that is ok, I’m a big boy, and I have been doing this long enough to know even the best have a slump.
Earnings continue this week with Nvidia, Disney, and Roku slated to report results. Disney reporting Tuesday, followed by Roku on Wednesday, and Nvidia on Thursday. This will be the final week of earnings predictions.
Nvidia has put together another solid year rather quietly, perhaps because most of the significant gains occurred through the middle of March. But the stock is higher by over 23 percent on the year, much better than the broader S&P 500’s flat returns.
Analysts are looking for revenue to have grown by 48.63 percent during the fiscal first-quart of 2019 to $2.88 billion. Meanwhile, earnings are expected to have risen by 94 percent to $1.65 per share, monster growth numbers for a company that’s growth rate never seem to slow. But more importantly will be how the company guides the coming quarter because analysts are looking for total revenue of $2.946 billion, a rise of 50 percent, while earnings are seen climbing by nearly 63 percent to 1.64 per share. Massive growth rates, for this company especially given the monster growth rates of the past. Pay close attention to data center growth that may be key.
The company has not missed on the top or bottom line since April of 2016 and has beaten analysts earnings estimates by an average of 20 percent, with a standard deviation of 10 percent. Meanwhile, revenue has beaten estimates by an average of 8 percent with a standard deviation of 6 percent. Pretty good odds that Nvidia once again crushes those estimates.
Being A Bear Doesn’t Pay
Over the past year and a half, I have been relatively bearish on Nvidia, and wrong. Although I have from a trading standpoint, I have gone back and forth. But overall, I have been very impressed by the companies ability to grow into its valuation. The market usually over-optimistic and tends to overvalue story such as Nvidia, but in this case, Nvidia has been able to deliver.
The stock tricked me about a week ago, when it fell below support at $217, but bounced back quickly. It has now convincingly broken out, rising above its downtrend on the stock price, and the relative strength index. Climbing back to the highs around $253 seems possible after results.
The options market has an implied volatility of 65 percent for the options set to expire in 7 days, and that equates to a range of 9 percent up or down, a big move.
Surprisingly or not the options set to expire May 18 have the most significant open interest at the $235 strike price, with 34,000 open calls to 33,000 open puts. That means it is anyone’s guess which way Nvidia goes after results.
Overall, it seems like a rise back to around $250 following what should be strong results, would not be surprising.
Disney is expected to report that fiscal second-quarter earnings climbed by 13.25 percent to $1.70, while revenue is seen rising by 5.8 percent to $14.11 billion. Disney’s history on reporting results, is not nearly as consistent as Nvidia, with Disney beating earnings by an average of only 2 percent, with a standard deviation of 7 percent, while revenue misses estimates on average by 2 percent with a standard deviation of 1 percent, Yikes! That does not bode well for the upcoming results this week
The options set for expiration in a week have an implied volatility of about 35 percent, and that suggests a rise or fall of about 4.85 percent, following results.
The options with the most significant open interest are the May $100 strike price, with roughly 31,000 open puts to 26,000 open calls, suggesting a slightly bearish bias after results.
Disney’s has gone nowhere since the August of 2015, but the setup in the chart is one of the most bullish long-term structures around, and when Disney does breakout finally it will be a massive ride higher in the stock, likely easily surpassing the $120 level. I think for the stock it might simply be a matter of when.
In the interim, I think Disney could revert to the upper end of the range after results to about $110.
Finally, we will finish with Roku. The company is newly listed so there isn’t a whole lot of data to go off on this one. Analysts are looking for the company to report a loss of $0.15 per share, while revenue is seen at $127.55 million.
Implied volatility is through the roof at 144 percent, meaning over the next seven days the stock could rise or fall by 20 percent! Huge!
The most significant levels of open are for expiration on June 15, and they are the $34 and $35 strike prices, with nearly 5,300 open calls at $34, and almost 3,000 open calls at $35. The $35 puts have about 2,900 open contracts. This one appears to be way more bullish than bearish and would suggest a rise above $37 following results.
The chart is relatively bullish too, with a firm bottom in place around $30, and rising RSI. The next significant level of resistance comes around $37.75 on the chart.
The options and the chart suggest shares rise following results, but there isn’t enough to go on regarding earnings. So for this one, I think we do see a rise post results back to around $37.
That is all
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