Nvidia (NASDAQ:NVDA) stock has once again knocked it out of the park with its quarterly results, but didn’t have a post-earnings rally. Are investors focusing heavily on a negative aspect of the latest results/guidance? Is there some sort of market-related factor that is outweighing this positive news?
In other words, is the market’s muted reaction a warning sign, or no cause for concern? Let’s dive in, and find out.
NVDA Stock: Another ‘Beat and Raise’ Quarter
Post-market on Nov. 21, Nvidia released results for its fiscal third quarter (ending Oct. 29). For the quarter, the chip designer reported revenue of $18.12 billion, and earnings of $3.71 per share. This represented a 206% jump in its top line, and a more-than-twelvefold increase in its bottom line, compared to the prior year’s quarter.
Results during Q3 were also up a solid amount sequentially. Revenue and earnings were up 34% and 50%, respectively, compared with Q2. Yet not only is Nvidia continuing to profit handsomely from selling the “picks and shovels” for this AI gold rush.
The company’s results also came in ahead of sell-side estimates. Last quarter’s revenue figure came in $2.01 billion ahead of analyst consensus. NVDA’s earnings per share figure came in 69 cents above forecasts. To top things off, alongside exceeding expectations with its quarterly numbers, the company also made an upwards revision to guidance.
Nvidia expects revenue this quarter to come in around $20 billion, moderately above prior forecasts ($17.9 billion). Again, with these “beat and raise” results, you may be asking why NVDA stock isn’t soaring higher on this news.
There’s a Silver Lining With the Market’s Low-Key Reaction
There are three reasons the market has had such a low-key reaction to the NVDA Q3 earnings release. First, while perhaps happy to hear that Nvidia’s AI tailwinds have yet to slow down, although “AI mania” has not disappeared, it has come down in intensity.
Second, and especially with AI chip plays like NVDA stock, China-related worries are very much top of mind. There are concerns that Nvidia may struggle to meet expectations due to the U.S. restrictions on AI chip exports to China. Add in some likely profit taking, from investors buying on the “rumor” of strong results, and selling on the news, and it’s not a mystery why NVDA is trading sideways.
However, there is a silver lining for both those who currently own the stock and for those who have yet to buy. Little has changed with the overall Nvidia growth story. Meanwhile, with the stock holding steady, the opportunity to enter/add to a position at a reasonable price has re-emerged.
Falling Out of the Fast Lane? Not So Fast!
As I argued previously, Nvidia has figured out a workaround to this would-be China dilemma. Even if AI chip sales to China slip, burgeoning demand worldwide is likely adequate enough to make up the difference.
Coupling this with rebounding demand for Nvidia’s non-AI chips, such as chips for the gaming market, it’s far too early to conclude that this company is on the verge of falling out of the fast lane.
Instead, Nvidia will probably continue to report a high level of revenue and earnings growth. This will enable the stock to maintain its current valuation (40.6 times forward earnings), and to keep climbing, to prices well above present levels (around $500 per share).
In short, there’s one clear takeaway from earnings: with the bull case still intact, adding or increasing exposure to NVDA stock remains a worthwhile move.
NVDA stock earns an A rating in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in NVDA. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.