Nvidia Reports Q2 Earnings On Thursday After Market Close

Nvidia Corporation NVDA reports second-quarter earnings for fiscal 2018 after the closing bell on Thursday, August 10. The stock can be prone to big price moves in post-earnings trading and as low volatility persists across equity markets, many traders have been looking for stocks with heightened volatility.

Looking at the past several periods of the Investor Movement Index®, which measures what TD Ameritrade clients have actually been trading and how they’re positioned in the markets, NVDA has been one of the most widely traded stocks among TD Ameritrade clients. Over those periods, NVDA has continued to rally after posting first-quarter results that came in above analyst estimates.

In the company’s first quarter of fiscal 2018, NVDA reported non-GAAP earnings of $0.85 per share on $1.94 billion in revenue, year-over-year increases of 85% and 48%, respectively. Broken down by market platform, the company reported the highest year-over-year growth in Gaming, Datacenter and Automotive.

Gaming has generated the largest portion of revenue out of its market platforms and in the first quarter NVDA reported that Gaming revenue increased 49% year over year to $1.03 billion. Growth in virtual reality, esports and PC gaming, as well as cryptocurrency mining have been some the factors cited by analysts that have driven growth in the Gaming market platform in the past.  

In recent quarters, volatility and growth in cryptocurrencies has resulted in swings in demand for graphics cards from companies such as NVDA and Advanced Micro Devices, Inc. AMD, according to CNBC. But as MarketWatch pointed out in a recent article, when rapid changes in demand happened in the past “many miners sold their cards on the secondary market, which can hamper demand for new cards and could be especially damaging if the companies increase shipments and suddenly have too much inventory.”

Revenue from the Datacenter market platform in the first quarter increased to $409 million, a 186% increase compared to the prior-year period.. CFRA analysts anticipate future demand for these products to be driven by ongoing cloud adoption and data growth. After the company announced the new Tesla V100 data center GPU in May, some analysts thought Datacenter revenue would be impacted in the short term by customers waiting to purchase the newest GPU.

The Automotive market platform has been a growing focus among analysts due to the company’s partnerships focused on developing autonomous driving and the increased use of more complex computer systems in automobiles. Automotive revenue in the first quarter increased 24% year over year to $140 million.

FIGURE 1: NVIDIA YTD PERFORMANCE. After trading sideways for much of the year, NVDA gapped up after last quarter’s earnings report and with its rally since early May is up 66.94% year to date. Chart source: thinkorswim^® by TD Ameritrade.  Data source: Standard & Poor’s. Not a recommendation. For illustrative purposes only. Past performance does not guarantee future results.

Nvidia Earnings and Trading Activity

For the second quarter of fiscal 2018, NVDA is expected to report earnings of $0.69 per share, up from $0.53 in the prior-year period, on revenue of $1.96 billion, according to Wall Street consensus analyst estimates. Over the past eight quarters, NVDA has beat analyst estimates on both the top and bottom line.

NVDA just hit a new all-time high of $174.56 on August 8 during the trading session. The stock has increased substantially over the past several years and so far this year it is up 66.94%, closing at $170.30 yesterday. Around the upcoming earnings release, options traders have priced in about a 7.5% potential share price move in either direction, according to the Market Maker Move indicator on the thinkorswim® platform.

In short-term trading at the August 11 weekly expiration, calls have been active at the 170 and 180 strike prices, while puts have been active at the 160 and 165 strikes. As of this morning, the implied volatility sits at the 88th percentile. 

Note: Call options represent the right, but not the obligation, to buy the underlying security at a predetermined price over a set period of time. Put options represent the right, but not the obligation to sell the underlying security at a predetermined price over a set period of time.

Looking Ahead

Snap Inc SNAP also reports earnings after the closing bell on Thursday, the company’s second quarter reporting as a public company. Beyond earnings, July’s Producer Price Index comes out Thursday morning and the Consumer Price Index is released on Friday. If you have time, make sure to check out today’s market update to see what else is happening.