Nvidia’s Results: Stunning!

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Speechless, absolutely speechless. When reading through Nvidia’s earnings report. The results were stunning from many metrics. Revenue came in at $2.64 billion, nearly $300 million more than expectations of $2.363 billion. Non-GAAP EPS came in at $1.33, almost $0.26 ahead of estimates of $1.07. Huge beats on both the top and bottom. Revenue grew by 32 percent versus the same period a year ago, while earnings increased by 60 percent.

What was most impressive was the growth in gaming and datacenter. Gaming saw a sequential increase of 32 percent and y/y increase of 25 percent to $1.561 billion. Datacenter grew by 20 percent q/q and 109 percent y/y, what! Yeah.

Then too really add insult to injury, Nvidia comes out and gives guidance for the fourth quarter, with revenue of $2.65 billion, over $200 million more than estimates of $2.44 billion Come on.

These are impressive numbers.

But if there is one negative take away it is in the charts below, that shows the sequential growth by business segment.

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The chart above shows Nvidia’s Q1’17 gaming saw a sequential decline of 15 percent, while in Q1’18 gaming saw a sequential decrease of 23.8 percent. While 2Q’17 and ’18 both saw similar growth of about 13.5 and 15.5 percent, respectively. Then 3Q’17 saw an increase of nearly 60 percent, while 3Q’18 saw growth of only 32 percent. So while gaming put big numbers the growth rate on a sequential basis did slow.

Meanwhile, Datacenter has been consistently slowing since 3Q’17.

The y/y chart shows something similar.

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The stock was rising in post-market trading, but it is hard to say how the market responds to the results because we don’t know the expectations that were being baked in, nor the amount of day-trading the shares will attract.

The results are awe-inspiring though; nobody can dispute that.

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Disney

The key takeaway from Disney at least, in my opinion, was on the conference call when the company noted that their direct to consumer streaming product would be priced much less than Netflix. Disney said it is because the platform will have less volume, and their goal is to add as many subscribers when starting out.

It is an interesting statement, and one that should make you wonder, are they going to just give this product away, for some bottom basement price? Are we already seeing the value of content going to Zero? Netflix only had a price increase a month ago, and now Disney is saying their pricing will be much less than Netflix. Is the strategy to get as many subs on the Disney platform and then upsell these subscribers to live events or particular movies? To the like of renting or buying a movie, show, or event on-demand on your cable provider, like pay-per-view. Interesting to say the least, and something that needs further exploring.

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Technology

The technology sector had a steep sell-off and managed to recover some of those losses. But something was missing from that recovery, which the chart below illustrates. We can see the XLK ETF gapped, lower on the open and proceeded to trade lower, before recovering those losses. But notice that the ETF did not fill the gap created today and that the ETF stopped moving up at resistance (dotted yellow-line). Today’s trading forces us to draw the downtrend line and could suggest that there is more downside to go, and most likely refilling that gap circled in orange.

 

With earnings season now basically complete, we shall be going back to our regular format starting tomorrow.

Have a good night.

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Michael Kramer and the clients of Mott Capital own shares of DIS.

Michael Kramer Own XLK Puts

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.

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