Why It is No Big Deal Nvidia Beat Lowered Pre-announcement

Nvidia (NASDAQ:NVDA) is showing a “multiple bottom” on the charts. Having fallen to around $130 twice in 2019, the stock rallied from there. The latest rally following its lowered guidance beat suggests the stock could build a base from here.

Nvidia earned $0.80, beating estimates by $0.17. Although these are non-GAAP figures, the GAAP EPS of $0.92 still beat analyst targets. Revenue, however, fell a decisive 24.1% /Y to $2.21 billion.

CEO Manages Expectations Nicely

Just as Apple (AAPL) stock rallied after its earnings report, Nvidia did, too, albeit to a lesser extent, demonstrates that sharing bad news early weakens the stock’s overall drop. Nvidia is still down ~45% from highs but is attracting buyers.

Nvidia forecast channel inventory normalizing in the first quarter. The headwinds from China, which hurt GPU demand, may no longer be a factor as trade relations with the U.S. improve. And after AMD’s release of Radeon 7, investors now know it is hardly a competitive risk for Nvidia.

RTX 2080 and 2070 sales may have been slow at launch as consumers waited for AMD’s announcement. In the upcoming quarter, GTX card sales may accelerate as retail channels offer generous discounts. And once inventory is cleared, Nvidia is in a good position to market RTX and ray-tracing.