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Nvidia To The Rescue Please click here for a chart of NVIDIA Corp (NASDAQ: NVDA).
Note the following:
- The Morning Capsule is about the big picture, not an individual stock. The chart of Nvidia stock is being used because Nvidia is driving the big picture right now.
- The chart shows a gap up on blowout earnings.
- We previously shared with you prior to Nvidia earnings:
The consensus is $11.2B in sales for the last quarter and $12.5B for the current quarter. The consensus is $18B per quarter starting in 2025. There will be many details in the earnings report. However, it is the revenue number and revenue projections that will mostly determine where the stock goes and, by extension, where the entire stock market goes.
- Earnings from Nvidia were one of the best we have seen in our over 30 years in the markets.
- Nvidia reported revenues of $13.5B for Q2.
- For the current quarter, Nvidia is guiding revenues of $16B.
- Nvidia reported Q2 data center revenues of $10.32B, up 141% from Q1.
- Nvidia is authorizing an additional $25B in share buyback.
- Permabears are out in force saying that Nvidia is a very expensive stock. They were saying the same thing when Nvidia reported earnings for Q1, and the stock gapped up as shown on the chart.
- In The Arora Report analysis, Nvidia is growing into its valuation. Given the current trends, our take now is very similar to our call that we published right after Q1 earnings. The prior call from three months ago is reproduced below for your convenience.
Many investors on social media are sadly mistaken about what happened yesterday after hours. They are pointing to a very expensive evaluation of a trailing PE of 164, a forward PE of 63, and price/sales of 26. Yesterday’s earnings changed it all. If the present trend continues, in The Arora Report analysis, Nvidia will likely earn $10 - $12 in 2024. Using $11 as the mid-point and even after a 29% stock jump after hours, this translates to forward PE of 36. For a stock that performs significantly better than perfection, a forward PE of 36 is reasonable. As a matter of fact, The Arora Report is raising its target on Nvidia to $565 - $615, compared to the closing price of $305.38. Nvidia is in the ZXY Buy Model Portfolio.
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- The Arora Report raised the target zone on NVDA ahead of earnings.
- Two thirds of the rise in the stock market in 2023 is due to market mechanics. When the stock market rises due to market mechanics, it is a highly risky market. The stock market, especially AI stocks, have been showing signs of being on the verge of a significant correction. However, the blowout earnings from Nvidia are saving the stock market from a drop.
- Thank you for all of your requests for a new in-depth podcast on the risks and rewards of Nvidia after earnings. We have started work on the podcast. The podcast will be available in Arora Ambassador Club.
- The Fed’s symposium in Jackson Hole kicks off today. Powell’s speech tomorrow is critical.
- Weekly initial jobless claims came at 230K vs. 240K consensus. Initial jobless claims are a leading indicator and carries heavy weight in our adaptive ZYX Asset Allocation Model with inputs in ten categories. In plain English, adaptiveness means that the model changes itself with market conditions. Please click here to see how this is achieved. One of the reasons behind The Arora Report’s unrivaled performance in both bull and bear markets is the adaptiveness of the model. Most models on Wall Street are static. They work for a while and then stop working when market conditions change.
- Durable goods data is mixed.
- Durable goods came at -5.2% vs. -4.0% consensus.
- Durable goods ex-transportation came at 0.5% vs. 0.2% consensus.
- Investors should be mindful of a potential sell the news reaction as the day progresses in spite of the bullishness this morning.
- As an actionable item, the sum total of the foregoing is in the protection band, which strikes the optimum balance between various crosscurrents. Please scroll down to see the protection band.
BRICS BRICS have invited these six countries to join: Iran, Egypt, Ethiopia, Argentina, Saudi Arabia, and U.A.E.
BRICS currently consists of Brazil, Russia, India, China, and South Africa.
BRICS are aiming to reduce dominance of the U.S. dollar.
Magnificent Seven Money Flows Money flows in NVDA were extremely positive in after hours after release of the earnings. However, in the premarket, money flows in NVDA are negative.
Money flows after hours were very positive in Amazon.com, Inc. (NASDAQ: AMZN), Meta Platforms Inc (NASDAQ: META), Microsoft Corp (NASDAQ: MSFT), NVIDIA Corp (NASDAQ: NVDA), and Tesla Inc (NASDAQ: TSLA). However, money flows this morning are negative in Apple Inc (NASDAQ: AAPL) and Alphabet Inc Class C (NASDAQ: GOOG).
In the early trade, money flows are mixed in SPDR S&P 500 ETF Trust (ARCA:SPY) and Invesco QQQ Trust Series 1 (NASDAQ: QQQ).
Momo Crowd And Smart Money In Stocks The momo crowd is aggressively buying stocks in the early trade. Smart money is