Trading Nvidia Post-Earnings
Aug 24, 2023
Nvidia (NVDA) held its quarterly earnings call yesterday, and the stock rallied after an extremely strong report—the company beat quarterly earnings-per-share (EPS) and revenue expectations by 26% and 20% respectively.
Nvidia reported an EPS of $2.70 on an expectation around $2.14 and posted a revenue of $13.51 billion on an expected $11.22 billion.
The sky appears to be the limit for this company, blowing both EPS and revenue out of the water in a big way. What's interesting though is that the expected stock price move for earnings was just under $50, as discussed in the earnings preview article, and the stock hit that mark in after-hours trading, just after 4 p.m. Central Time on Wednesday.
The stock opened 2023 at $148.41 and breached $500 per share for the first time after the earnings call. What a massive move we've witnessed this year in this tech giant's stock price!
It's always fun to check out the earnings move by the minute with high-flier stocks like Nvidia.
The first yellow arrow points to the stock price move right after the earnings were released—a big gap to the upside is not surprising given the massive outperformance relative to expectations for this earnings call. The stock price faltered a bit after the initial jump, but it gapped up again when the pre-market session started at 3 a.m. today, as signified by the blue arrow.
When the market opened today, there were some other factors that caused the general market to take a nosedive, and NVDA shares fell along with it right after the open shown by the red arrow in the image above, erasing about half of the gain the stock saw from the previous close at $471.16.
The relative strength in Nvidia can't be understated, as we see competitors like Advanced Micro Devices (AMD) selling off big after the big earnings report from NVDA stock. It's quite surprising to see such a selloff in AMD, given the fact that the company rallied after the close on Wednesday alongside Nvidia, indicating that the move was good for all AI companies.
The options market is pricing in an expected move of about +-$100.00 from the current stock price in NVDA through the December 2023 cycle, which almost covers the rest of the year's expected movement. Based on current implied volatility, this is about 20% of the current stock price. Not too shabby for bulls or bears, depending on your sentiment.
The big takeaway for me from this earnings call was the revenue figure from the datacenter unit, which encompasses the demand from the AI sector. The revenue figures were massive and resulted in a year-over-year (YoY) increase of over 170% and they did not back down from forecasts for the next quarter and the rest of the year.
We'll see where NVDA ends up at the end of 2023, but it's full steam ahead so far for the popular tech giant.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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