It’s a make-or-break week for Nvidia (NVDA).
The firm’s GTC Technology Conference will begin on Monday (today) and will take place this Thursday. The event is open to the general public. CEO Jensen Huang is expected to deliver the keynote address on Tuesday morning. This is when Huang tends to introduce whatever Nvidia’s latest and greatest is.
Last year, Huang talked about the firm’s Omniverse platform to include interactive AI avatars. The previous year, he introduced the Ampere chip architecture. This year, the firm’s next-generation chip architecture dubbed “Lovelace” is expected to debut. This could be a trade event for a stock that has been mired in the opposite for about 10 months now.
We know that the company has tempered expectations. We know the firm has already taken a $1.22B inventory charge as a result. At last check, the data center, which was already the main reason for this name, continued to grow, adding $3.81B in revenue (+61%) to total fiscal third quarter revenue of $6.7B. Total revenue was up just 2.9%, as gaming-derived revenue fell 33% to $2.04B.
With recent changes to the Ethereum blockchain making mining for that cryptocurrency an obsolete activity, is gaming revenue here to stay? Do gambling revenues only return a little? The firm guided for the fourth fiscal (current) revenue more than a cool $1B below the Wall Street consensus at the time of the earnings release.
For this quarter, Nvidia reports in late November, so not sooner. The consensus is for adjusted EPS of $0.71 (GAAP EPS of about $0.41) on revenue of $5.85B. This compares to adjusted EPS of $1.17 (GAAP EPS of $0.97) on revenue of $7.1B for the year ago comp.
Not nice, but…
Even with the tough quarter, free cash flow was positive. Unlevered free cash flow came to $525.9M. Yes, down a lot from the $2B + for each of the previous three quarters, but Nvidia had seen numbers in that ballpark as recently as the May 2021 quarter. The balance sheet is pretty strong. At the end of July, Nvidia had a net cash position of $17.037B, and current assets of $27.418B. This included $3.889B in inventories. Current liabilities were $7.573B. That’s a running ratio of 3.62 and a quick ratio of 3.11. Both ratios were down significantly from the previous quarter. Both are still great.
Total assets are $43.476B, including $6.408B in “goodwill” and other intangibles. At 14.7% of total assets, I see nothing offensive. Total liabilities less equity came to $19.625B. This included long-term debt of $9.7B, which the firm could pay in full out of pocket if necessary.
Nvidia’s tangible book value of $17.443B and tangible book value per share of $7.01 would have been a firm all-time high if not for the previous two quarters. What I’m basically saying is, this business is in great shape, even if the underlying business is going through a period of uncertainty.
The shares are very close to technically oversold. The daily MACD is in terrible shape. The 21-day EMA, 50-day SMA, and 200-day SMA are all trending lower, which helps keep portfolio managers off the name or at reduced exposure levels. I see no reason to invest in NVDA volume until NVDA shows me that my Pitchfork model dating back to November can no longer cover the stock’s range as it declines.
I think if a trader (and I’ll probably do this myself) was able to buy a small position in NVDA weakness early Monday, sub-$130 would interest me, the trader might this is able to flip the stock out. on Tuesday (post or during Huang’s address) for profit and be completely out of the way before the Fed imposes any increased risk – from what already exists – on the entire equity market.
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