Sales Trader
Summary: NVIDIA (NVDA) reports 2Q earnings tomorrow morning after US market closes. NVDA seems to carry these type of premiums: AI hype, FOMO, bubble, crowdedness, growth, stocktwits, momentum & line of least resistance.
All eyes on NVDA reporting tomorrow morning (should listen to earnings call at 5am) and it has been 3 months since writing 1Q earnings attached. NVDA seems to carry these type of premiums: AI hype, FOMO, bubble, crowdedness, growth, stocktwits, momentum & line of least resistance. Equity risk premium of NVDA is the same as TSLA at 9.3% (vs credit spread at 4.4%) but its implied volatility is three times bigger heading into earnings. NVDA’s coronavirus closing low on 16 March 2020 coincides with VIX’s top 82.69 and bitcoin’s 4,904 so correlation is there notwithstanding recent divergence with NVDA stock price comeback buy the rumour type of rally as it at one stage hit fresh record high $481.87 last night before it retraced down and some of the outrageous out of the money calls seem to have unwound given surging volatilities. The stock price literally tripled this year which makes it second strongest since its quadruple return back in 2001.
IMO based on above and mid PE ratio 98 times (between trailing 149 and forward 47) in the middle of current risk free rate of 4.3% or 23 times, a risk averse person would rather sell some prior (passive move) – already seen by last night’s price action of selling into close - or wait to buy post earnings regardless of the reaction even if it gaps up again tomorrow in postmarket to catch the tail of the comet as buying high isn’t a cardinal sin compared to selling low. BTW risk reversal displays high demand on 15 delta ($533.61) and 10 delta calls ($556.88). Also free cash flow estimates are wide open across analysts with lowest at $579m vs highest at $6.4b.
Macro backdrop
2Q
3Q
2024 YEAR
Recent broker consensus target price
Key numbers
The end of the road
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