JUNE 20, 2020
Link to the Real. It Pays.
market blinds with the brilliance of an angry diamond. Hot here now there; secular tech, airlines, energy, financials to the cyclicals. Meanwhile mega-caps shimmer on. As the smoking money chases, SaaS tech bubbles or simply soars straight into space. While Tesla and FICO rage deafeningly the malicious warning sign leers; “Victims chase.” The burned have learned. Hum.
When prices double anything after is chasing crispy. Astounding growth is, astounding, when you’re in from the start. Merely spectacular growth is often better when searching for something to acquire. That’s NVIDIA. One month return 16%. YTD return a mere 56.5%. Of course it’s expensive. But so is a Benz, until Drunky the Clown center-punches you and you walk away. Only value managers complain like that, as they down yet another dose of 3M. That thinking keep scads out of Amazon.
While the world fights the invisible, while the world resists nature’s call to gather, while the world pushes ever deeper into our digital future, it’s NVIDIA. Is NVDA a good buy? Only if you like things that even COVID can’t stop. “While the World. NVIDIA.”
has surprised to the upside six times in a row. Q3 and Q4 that surprise was by double digits. NVDA is growing revenue at an 18.5% five year annualized rate, and cash flow by 30.2%. But, so what? The Santa Clara-based chip maker just reported their Q1, 2021 results. 2021? Right. Financial reporting’s weird like that. What did they say?
“Revenue of $3.08 billion, up 39 percent from a year earlier; Record Data Center revenue of $1.14 billion, up 80 percent from a year earlier; Record GAAP gross margin of 65.1 percent.”
Thursday, May 21, 2020
They gets us lit. We love it when they talk filthy, like “GAAP earnings per diluted share for the quarter were $1.47, up 130 percent…” After that do you really care that Morningstar provides the company’s shares a Fair Value Estimate of $200.00? The market says they’re worth $370.45. That’s after popping 3.68% this week. Hum. We think NVIDIA’s just getting warmed up. What’s the chart say?
line charting works well when searching for long-term trend. Above we see just that, an intact year-long uptrend. Everything confirms strength and integrity; multiple contacts along a rising trend line, a steadily-rising MACD, with room to rise, and properly stacked 20, 50, & 200 day SMAs, all strongly rising. The sole question here is an RSI reading bumping into 70, beginning to blink “overbought.” We see a resolution to that in the daily chart just below. Green box.
grey circle located on the Daily chart above represents a complexity. Not only does it display an overbought RSI, it also reflects the wider market reaction to the release of initial coronavirus reports out of China. Chart after chart displays this precise peak, followed by a steep plunge. Yet NVDA does not fall out of bed, as some did. You’re witnessing true strength when sweeping global macros fail to derail. NVIDIA corrected but didn’t break trend(green box.)
NVIDIA a good buy? We see NVDA as a buy here. If you’re concerned about valuation don’t buy NVDA. Yet if you want both the best and brightest, and serous sustainable growth, pick up NVDA. NVIDIA is the leader in graphics processing(GPUs), the choice for this year’s video game refresh cycle. Catalyst. As Take-Two has demonstrated, gaming has more then reached mainstream. It’s entrenched, timely, and expanding. Think spectator-driven professional Esports. NVIDIA is also the nascent AI industry processor choice now, and a heavy data center player. Think quadrupling data needs to drive 5G and autonomous vehicles.
In our opinion NVDA is as good a buy as one can make. It’s a partial position buy here. Look for an overbought pull-back. On 6-15, pre-market, we saw it for $350. Put in a “good until cancelled”(GTC) limit order at $355. You may just score. Yet, a partial position below $370 will pay over time, maybe quickly. Look at the charts. NVDA is bull-rushing a real uptrend now. Yet it has only risen 1.99% over the past twenty days. In an uptrend that’s called “resting.”
We’ve spent years working to bring it all. Long pieces are great and we love them. Look at our take on Capital One(COF.) We want the whole story down to the granular. Yet time has shown that bringing the big facts cleanly pays big. It’s easy to read and memorable. In a busy world that matters. As always, good luck and good investing.