The upcoming earnings report from NVIDIA Corp NVDA could have significant implications for the stock market, according to a macro strategist.
What Happened: The market is heavily reliant on Nvidia’s earnings, and any disappointment could result in a rapid 5% to 10% sell-off in just a few days. This warning was issued by Peter Tchir, a macro strategist at Academy Securities, in a recent Bloomberg interview.
Tchir said, “I think we’re going to see this kind of cascading, where people try and buy the dip, it fails, and gets pushed lower. So I think we get this fairly dramatic, in a couple day period maybe, of a 5-10% pullback.”
Despite recent market rebounds, Tchir observed a significant number of bullish bets, particularly on Nvidia. Options traders, as reported by the Wall Street Journal, are anticipating an 11% upside after the earnings call this week.
“I think people are expecting a very, very good beat, and even if they beat, I’m wondering who’s turning around to buy,” Tchir said.
“It could be one of the cases where it has good numbers, it bounces after the numbers, and everyone looks around and goes: who’s the buyer? Turns out no one is a buyer.”
Why It Matters: Nvidia’s stock has been on a rollercoaster ride in recent months. In November 2021, the company faced significant challenges, resulting in a 68% decline and finding support at $180. However, the company’s shares bounced back due to increased demand for artificial intelligence and gaming, leading to a 529% increase in the stock price.
Analysts are now predicting significant Q4 earnings, with a forecast of $4.53 per share, a substantial increase from the prior year’s $0.88 per share Q4 earnings. However, a Bank of America analyst has also warned that the stock could face a potential pullback after the earnings report, with an 11% implied post-earnings move based on bullish buy-side estimates for Nvidia's Q4 earnings.
In the wake of a significant drop in Nvidia’s shares, investors are being advised to consider this as an opportunity rather than a setback. This dip could be attributed to profit-taking ahead of the earnings release, according to the host of CNBC’s “Mad Money, Jim Cramer. Despite this, the drop is seen as a potential entry point for investors who have not yet invested in Nvidia.
Nvidia stock. Photo via Shutterstock
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