Maria's viewpoint
August 28th was the most exciting earnings day of the season. I own shares of both Nvidia (NVDA) and Crowdstrike (CRWD). NVDA is once again the decisive battle at Sekigahara. CRWD is reporting for the first time after a system failure. As a result, both stock prices dropped after the market closed. Why? Is it a sell-off? Or a buying opportunity? I'll share my personal judgment and bias. Let's go!
<My Thoughts on NVDA's Earnings>
- Guidance for the next fiscal year
This is a summary of the forecast I made during my "never lose study group" that I posted the other day, with today's results added.
<My Thoughts on NVDA's Earnings>
- Guidance for the next fiscal year
This is a summary of the forecast I made during my "never lose study group" that I posted the other day, with today's results added.
As you can see from this, the actual results were higher than the consensus and my forecast. But the stocks went down. Why?
In my post the other day, I said the following:
In my post the other day, I said the following:
As an experienced analyst, I can envision the scene of NVDA's CFO discussing the guidance numbers with company executives until just before the earnings announcement.
When I determined the guidance forecast at the seminar on August 18th, the consensus was $31.4 billion. In that case, I think even $32 billion would have been fine. So we also adjusted our estimate to $32 billion.
However, if the consensus is $31.7 billion, rounding it up would make it $32 billion. This is weak.
So, the day before yesterday, in my post, I mentioned that "How much should I exceed the consensus, $32.5 billion or $33 billion?"
And when we actually opened the lid, next year's guidance was $32.5 billion.
This is a rather delicate number. This is because since exceeding $10 billion in the April 2023 period, the guidance has always been in the unit of 1 billion.
The fact that the guidance is in units of 0.5 billion now stands out to me. Why $32.5 billion instead of $33 billion? This is what bothers me.
Growth stocks like NVDA must exceed the guidance. There is a need to provide a figure that can be confidently exceeded with a considerably comfortable margin.
Moreover, as earnings approach, the consensus estimates are typically revised upward, making it even more crucial.
If that's the case, there is a desire to set the guidance a little lower. $33 billion is a bit tough. But $32 billion is probably too low. Therefore, it was likely a tough decision to set it at $32.5 billion.
As I mentioned in a previous post, comparing to the same period last year has become difficult starting from this July period. The slowdown in growth rate is clearly evident.
NVDA, which used to easily surpass analysts' raised numbers, now seems to have become a NVDA that fears upward revisions in consensus.
I sensed this in the number of $0.5. Therefore, even though the guidance was much higher than expected, I think it ended up reacting as I had described in 'Scenario 2'.
Even though the financial results were good, the stock price dropped. This is exactly the reaction of the market where shareholders were lagging behind.
Furthermore, there was another major issue in NVDA's financial results this time.
- Margin downward revision
In the guidance announced in the previous financial results, it was indicated that the Gross Margin for this period would decrease.
The guidance for this term (July period) was 74.8%. The actual result was 75.1%. A mere 0.3% beat.
The Gross Margin for the April quarter was 78.4%, compared to the 76.3% guidance, resulting in a beat of about 2%. In other words, the beat against this quarter's guidance was very weak.
My model had assumed 76%, and probably the analysts' models as well.
And the guidance for the October quarter has further decreased to 74.4%.
NVDA's demand far exceeds supply, customers are queuing up to grab the commodities, so NVDA shouldn't have had to sell chips at asking price, right?
Why is the Gross Margin decreasing in this situation? Something seems odd.
The reason for the margin decrease mentioned in the conference call doesn't quite convince me personally.
It seems that as Blackwell's sales increase, the margin decreases, but why is the margin for the latest and most high-end chips lower than the one from a model ago?
Are the chip prices too high, and they won't sell unless the prices are lowered? That's odd too.
When institutional investors find something inconsistent, they usually sell first and then investigate. After conducting research, if they are satisfied, they would buy back even if the price had gone higher than what they sold it for.
This is because institutional investors fear a significant drop more than they anticipate a significant rise. The unknown is the scariest. Institutional investors aim for "lossless investments".
Risk management is the most important factor for institutional investors. That's why I think some investors might have had doubts about the trend of the gross margin and sold their investments after the financial statements.
- No problem with Blackwell's delay.
I don't think the rumored delay in Blackwell's delivery has much to do with the stock price. A 2-3 month shift in sales does not affect the fundamentals.
- What will happen to the stock market tomorrow?
The movement of NVDA's stock after the financial statements is dominated by speculative investors rather than fundamental investors. They aim for a windfall using short-term options, etc.
Speculators who approached the financial statements with a long (buy) position in anticipation of a short-term rise have probably already sold or will sell tomorrow.
After the opening, if a downtrend can be confirmed, algorithmic trading that follows the trend will be activated, so in that case, I think it wouldn't be strange for the market to drop by double digits tomorrow. This is the scenario I predicted the day before yesterday.
Since the earnings themselves were good, there is a possibility that the market will turn upward tomorrow. However, it won't go up without fundamental investors coming to buy.
For fundamental investors, the slightly bearish next year's guidance of $0.5 as I mentioned earlier, and the mismatched downward revision of the Gross Margin, I think these will be a concern.
What should I do?
I bought stocks on August 5th, so I can't sell them until September 5th due to my company's rules. But I have too many NVDA stocks, and the stocks I have are three or four times higher, so I'm thinking about reducing them to about half soon.
Stocks will probably continue to rise, and in the long term, I probably think $200 is a solid point, so I won't sell everything. But it feels like I've already eaten the best part of the fish. Now it's like eating while being careful with the bones.
When I determined the guidance forecast at the seminar on August 18th, the consensus was $31.4 billion. In that case, I think even $32 billion would have been fine. So we also adjusted our estimate to $32 billion.
However, if the consensus is $31.7 billion, rounding it up would make it $32 billion. This is weak.
So, the day before yesterday, in my post, I mentioned that "How much should I exceed the consensus, $32.5 billion or $33 billion?"
And when we actually opened the lid, next year's guidance was $32.5 billion.
This is a rather delicate number. This is because since exceeding $10 billion in the April 2023 period, the guidance has always been in the unit of 1 billion.
The fact that the guidance is in units of 0.5 billion now stands out to me. Why $32.5 billion instead of $33 billion? This is what bothers me.
Growth stocks like NVDA must exceed the guidance. There is a need to provide a figure that can be confidently exceeded with a considerably comfortable margin.
Moreover, as earnings approach, the consensus estimates are typically revised upward, making it even more crucial.
If that's the case, there is a desire to set the guidance a little lower. $33 billion is a bit tough. But $32 billion is probably too low. Therefore, it was likely a tough decision to set it at $32.5 billion.
As I mentioned in a previous post, comparing to the same period last year has become difficult starting from this July period. The slowdown in growth rate is clearly evident.
NVDA, which used to easily surpass analysts' raised numbers, now seems to have become a NVDA that fears upward revisions in consensus.
I sensed this in the number of $0.5. Therefore, even though the guidance was much higher than expected, I think it ended up reacting as I had described in 'Scenario 2'.
Even though the financial results were good, the stock price dropped. This is exactly the reaction of the market where shareholders were lagging behind.
Furthermore, there was another major issue in NVDA's financial results this time.
- Margin downward revision
In the guidance announced in the previous financial results, it was indicated that the Gross Margin for this period would decrease.
The guidance for this term (July period) was 74.8%. The actual result was 75.1%. A mere 0.3% beat.
The Gross Margin for the April quarter was 78.4%, compared to the 76.3% guidance, resulting in a beat of about 2%. In other words, the beat against this quarter's guidance was very weak.
My model had assumed 76%, and probably the analysts' models as well.
And the guidance for the October quarter has further decreased to 74.4%.
NVDA's demand far exceeds supply, customers are queuing up to grab the commodities, so NVDA shouldn't have had to sell chips at asking price, right?
Why is the Gross Margin decreasing in this situation? Something seems odd.
The reason for the margin decrease mentioned in the conference call doesn't quite convince me personally.
It seems that as Blackwell's sales increase, the margin decreases, but why is the margin for the latest and most high-end chips lower than the one from a model ago?
Are the chip prices too high, and they won't sell unless the prices are lowered? That's odd too.
When institutional investors find something inconsistent, they usually sell first and then investigate. After conducting research, if they are satisfied, they would buy back even if the price had gone higher than what they sold it for.
This is because institutional investors fear a significant drop more than they anticipate a significant rise. The unknown is the scariest. Institutional investors aim for "lossless investments".
Risk management is the most important factor for institutional investors. That's why I think some investors might have had doubts about the trend of the gross margin and sold their investments after the financial statements.
- No problem with Blackwell's delay.
I don't think the rumored delay in Blackwell's delivery has much to do with the stock price. A 2-3 month shift in sales does not affect the fundamentals.
- What will happen to the stock market tomorrow?
The movement of NVDA's stock after the financial statements is dominated by speculative investors rather than fundamental investors. They aim for a windfall using short-term options, etc.
Speculators who approached the financial statements with a long (buy) position in anticipation of a short-term rise have probably already sold or will sell tomorrow.
After the opening, if a downtrend can be confirmed, algorithmic trading that follows the trend will be activated, so in that case, I think it wouldn't be strange for the market to drop by double digits tomorrow. This is the scenario I predicted the day before yesterday.
Since the earnings themselves were good, there is a possibility that the market will turn upward tomorrow. However, it won't go up without fundamental investors coming to buy.
For fundamental investors, the slightly bearish next year's guidance of $0.5 as I mentioned earlier, and the mismatched downward revision of the Gross Margin, I think these will be a concern.
What should I do?
I bought stocks on August 5th, so I can't sell them until September 5th due to my company's rules. But I have too many NVDA stocks, and the stocks I have are three or four times higher, so I'm thinking about reducing them to about half soon.
Stocks will probably continue to rise, and in the long term, I probably think $200 is a solid point, so I won't sell everything. But it feels like I've already eaten the best part of the fish. Now it's like eating while being careful with the bones.
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Kimihiko OP : I think the reason for the deterioration in margin is the cost of Blackwell's renovation.
masa5858 : I heard that TSMC has been requested to raise prices. Well, that's understandable.![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
大負けネコ : Nice to meet you. I am a small individual investor who assumes "long-term holding"? In fact, I am a beginner in US stocks who started buying US stocks at the end of last year. However, my investment experience began with "investment trusts" over 20 years ago, and I almost suffered a big loss from the immediate impact of the "Lehman Shock". I am not a "investment/financial professional", but in my work, I have experience with a personal business amount of 0.2 billion yen and budget management of about 12 billion yen as a budget management officer for the entire sales facilities. Due to my major in economics, I have been involved in accounting/finance for a long time, but I am also a handyman who can be assigned to events, foreign affairs, property management, and anything. I also have experience as a behind-the-scenes responsible person for international conferences. I started trading stocks around 10 years ago with a focus on "Japanese stock value investment", and I realized that despite not being good at math, I am good with numbers. Before I knew it, I became a "Nvidia minor shareholder" and now we are holding "earnings reports" again. However, I imagined that the main cause of the market being sold off in response to the Q2 earnings announcements of GAFAM was the "short-term speculative behavior prioritizing profit-taking by institutional investors" when it only fell below market expectations by just one indicator. After raising the hurdle of the preliminary estimate, they deliberately created an arbitrage and conducted a large-scale short sell to induce a decline in stock prices, and then bought back a large amount at the lower price. I haven't read the preliminary explanations from an analyst's perspective, but it was very helpful. Based on my own experience, at least for the next two years, "Nvidia is a buy" according to my buying criteria. On August 5th, on the "Black Monday of Reiwa," I recovered from a loss of about 3 million yen in Japanese stock assets to an increase of about 1 million yen over the past 24 days. US stocks are less than one-tenth of my equity assets and have been on the rise since the beginning. Although the investment fund is mainly invested in US stocks, it is enjoying a "bargain sale in Japan and the US" with asset losses reduced from about 2 million yen to about 10,000 yen through diversified investments in time, region, and products. Individual investors can aim to maximize profits with a long-term investment perspective against institutional investors who prioritize short-term performance. Now, should I use the "discounted accumulation dollar deposit utilizing the strong yen" to increase my holdings of US stock value stocks? Even as an amateur investor, I don't feel like losing. Because my portfolio is well-diversified. I apologize for the long text. And I am grateful for your contribution of knowledge.
HONDA N-ONE : Financial estimates and consensus still don't quite fit. In general, if the actual results do not meet the estimate, it is considered that the estimate was wrong. In the world of stocks, it is considered bad to have "missed estimates" with "unachieved results". It is the missed estimate that is bad, not the one who made the estimate. I don't understand. Wouldn't it be better if the results were better than the previous year or period? I don't understand.
もこgg : Considering the future growth prospects, the stock price would inevitably fall if it falls short of those predictions.
It's only a temporary downturn of the excess increase. In the long run, it will continue to rise.
182737223 : Leaving aside whether the analysis is correct, this is a person who writes self-righteous articles that have a strong sense of self-importance.