Summary:
- Nvidia Corporation (NVDA) took a beating on Friday morning, trading 20% lower.
- The devastation came after the company posted mixed earnings, as well as guidance that missed Wall Street expectations.
- However, we expect a bounce in early December, after the stock is subjected to additional near-term pain.
The chipmaker reported earnings per share of $1.97 and total revenue of $3.18 billion, compared to analyst estimates of $1.72 and $3.24 billion. With regards to guidance, management estimated $2.65-2.75 billion, below the average analyst estimate of $3.4 billion.
“We were clearly wrong on the stock, as we underestimated the magnitude of the channel inventory build in mid-range Gaming GPUs,” explained Goldman Sachs analyst Toshiya Hari. Goldman then removed Nvidia from its “conviction” list, maintaining a “buy” rating with a new target of $200.
In analyzing the market cycles for Nvidia (NVDA), we can see that it continues to trade in the declining phase of its current cycle. The stock previously broke cycle support, around $239, which is the point at which it started the current cycle. We have had a negative outlook since then. Our current projection is for a decline to around $152, and then a bounce in December.
For more from Slim, or to learn about cycle analysis, check out the askSlim Market Week show every Friday on our YouTube channel.
