It’s a make or break week for Nvidia (NVDA).
The company’s GTC Technology Conference kicks off Monday (today) and continues through Thursday. The event is open to the general public. CEO Jensen Huang is expected to deliver the keynote address on Tuesday morning. This is where Huang tends to introduce all that is Nvidia’s latest and greatest.
Last year, Huang spoke about the company’s Omniverse platform to incorporate interactive AI avatars. The year before, he introduced the Ampere chip architecture. The company’s next-generation chip architecture, known as “Lovelace,” is expected to debut this year. This could be a tradable event for a stock that has been stuck in reverse for about 10 months now.
We know the company has tempered expectations. We know that the company has already paid an inventory of $1.22 billion. At the last audit, the data center, which has already been one of the main reasons for its name, continued to grow, contributing $3.81 billion in revenue (+61%) to total revenue for the fiscal third quarter of $ 6.7 billion. Total revenues increased only 2.9% as gaming revenues fell 33% to $2.04 billion.
With the recent changes made to the Ethereum blockchain making mining for that cryptocurrency an obsolete activity, will gaming revenues stay low here? Is gaming revenue only slightly back? The company led fiscal fourth (current) total revenue more than a cool $1 billion below Wall Street’s consensus at the time of that earnings release.
As for this quarter, Nvidia is reporting late November, so not anytime soon. The consensus view is for an adjusted EPS of $0.71 (GAAP EPS of approximately $0.41) on revenue of $5.85 billion. This compares to an adjusted EPS of $1.17 (GAAP EPS of $0.97) on $7.1 billion in year-ago sales comp.
Not pretty, but…
Even with the tough quarter, free cash flow was positive. Unleveraged Free Cash Flow was $525.9 million. Yes, much lower than the $2 billion+ for each of the previous three quarters, but Nvidia hadn’t seen numbers in that range until the May 2021 quarter. The balance is quite strong. At the end of July, Nvidia had a net cash position of $17.037 billion and current assets of $27.418 billion. This included $3.889 billion in inventories. Current liabilities were $7,573B. That is a current ratio of 3.62 and a quick ratio of 3.11. Both ratios were significantly lower than in the previous quarter. Both are still spectacular.
Total assets add up to $43,476B, including $6,408B in “goodwill” and other intangible assets. At 14.7% of total assets, I don’t see anything offensive. Total liabilities minus equity was $19.625 billion. This included long-term debt of $9.7 billion, which the company could pay off entirely out of pocket if needed.
Nvidia’s tangible book value of $17.443 billion and tangible book value per share of $7.01 would both have been at the company’s all-time highs if not for the previous two quarters. What I’m saying is fundamentally, this company is in excellent shape, even if the underlying company is going through a period of uncertainty.
The shares are almost technically oversold. The daily MACD is in a sorry state. The 21-day EMA, the 50-day SMA, and the 200-day SMA are all trending downward, helping to keep portfolio managers either out of name or at a lower level of exposure. I see no reason to invest in NVDA in size until NVDA shows me that my Pitchfork model, which goes back to November, can no longer contain the stock’s range while trending lower.
I think if a trader (and I probably do this myself) could buy a small position in NVDA early Monday at weakness, sub $130 interested me, that trader might be able to flip the stock on Tuesday (post or during Huang’s speech) to make a profit and get out of the way completely before the Fed imposes increased – of what already is – general risk on the entire stock market.
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