Nvidia released its quarterly report yesterday after the close of the main trading session. Despite the fact that the company warned earlier about the deterioration of the main financial indicators (it was on this news that the shares collapsed by 10% on August 8-9), the final results still turned out to be an unpleasant surprise for investors.
The frustration erupted into a 4.5% fall in shares on the post-market, trading ended just below 164.5. Both revenue ($6.7 billion) and earnings per share ($0.51) were worse than expected (assumed $6.83 billion and $0.53 respectively).
The gloomy picture is complemented by a general decline in operating income by 80%, and net income by 72%.
For the first time in 2 years, Nvidia reported worse than market expectations, and in addition, the company's management gave a very pessimistic forecast for the results of the current quarter, expecting a fall in revenue by 17%.
Sales of graphics cards, which were the main driver of Nvidia's business growth, showed a 33% decline. Demand fell from gamers who were actively upgrading their computers during the most acute phase of the Covid-19 pandemic. Cryptocurrency miners are also in no hurry to purchase new equipment in the face of a precipitous fall in Bitcoin, Ethereum and other coins.
As a result, the company's warehouses accumulated huge stockpiles of unsold products. Now Nvidia has to give big discounts on the current generation of graphics cards, and the release of a new line of graphics accelerators is postponed from October at best to the end of the year.
And while the problems in the global economy only grow, and the Fed and other central banks continue to tighten monetary policy, it is unlikely that we will see a sharp improvement in the situation in Nvidia's business.
A decrease on yesterday's post-market to the level of 164.5 means a breakdown of support at the level of the previous local low around 170, as well as prerequisites for the formation of a “double top” pattern on the chart.
The medium-term goal will be a decline to annual lows just above the level of 140, and an intermediate mark of 157 will be suitable for partial taking profit.
The following trading strategy option can be offered:
Sell Nvidia at the current price. Take profit 1 - 157. Take profit 2 - 145. Stop loss - 170.
Also, traders can use Trailing stop instead of a fixed Stop loss at their own discretion.