NVIDIA Was The Chip Sectors' Last Hope
Two weeks ago I posted about a potential short term trade on Nvidia.
Nvidia is scheduled to report its fiscal third-quarter 2019 results on Thursday, Nov. 15, after the market close. Nvidia has a history of beating Wall Street estimates.
So if you think the Markets have bottomed for now and think NVIDIA is on sale, buying NVIDIA through by way of call options might be a great short term trade.
NVIDIA reported earnings on Thurs and on Friday, the stock had its worst day in more than a decade. During the earnings call, NVIDIA said it had issues clearing inventory of its older-generation gaming chips used in mining cryptocurrencies. But the kicker was Nvidia forecasted revenue of $2.65 billion to $2.75 billion for the next quarter, while analysts on average had been estimating revenue of $3.4 billion.
I’m not surprised by the NVIDIA’s results based on my negative sector bias. One month ago, I talked about Lam Research, the maker of chip machinery.
Lam is forecasting that its sales to DRAM, logic (processor) and foundry domestic and foreign clients will all be "incrementally higher" in the first half of 2019. Nevertheless, the charts are telling me something else…there is a reason the valuation is much lower, 10 times its expected fiscal 2019 (ends in June 2019) EPS consensus. I don’t think it’s a buy now or in the near future.
Because of NVIDIA’s forecast, I’m now bearish on the sector. The iShares PHLX SemiconductorETF, SOXX seeks to track the investment results of an index composed of U.S. equities in the semiconductor sector. It’s also the largest EFT under management that specializes in the chip sector.
And just like Lam Research, it too broke a monthly up trend line.
The chart suggests price is going to start trending down...my final target is $80.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
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by rollandthomas
Wow, that is a huge miss to expectations... I wonder what that says of other Tech earnings for next quarter... I remember the last recession was proceeded with a lot of Semis underperforming as an indicator... interesting to follow...
If you think about it, the semi go into every technology, technology powers and runs the world, so you make a great point, the Semis are a leading indicator of the Market from my standpoint.