NVIDIA Falls On Weak Outlook

Key Insights

• NVIDIA beats analyst estimates on both earnings and revenue. 
• Traders focus on the weaker-than-expected outlook for fiscal Q2 2023. 
• NVIDIA is trading at 24 forward P/E, which may attract some speculative traders. 

NVIDIA Stock Falls As Fiscal Q2 2023 Outlook Disappoints

Shares of NVIDIA found themselves under pressure after the company released its fiscal first quarter report.

NVIDIA reported revenue of $8.28 billion and adjusted earnings of $1.36 per share, beating analyst estimates on both earnings and revenue. While the results exceeded analyst consensus, traders focused on the outlook for the next quarter.

In fiscal Q2 2023, NVIDIA expects to report revenue of $8.10 billion, including “an estimated reduction of approximately $500 million relating to Russia and the COVID lockdowns in China”.

The size of the hit from the recent problems in Russia and China surprised the market, and NVIDIA stock moved closer to yearly lows.

What’s Next For NVIDIA Stock?

Analysts expect that NVIDIA will report earnings of $5.61 per share in the current fiscal year and $6.7 per share in the next fiscal year, so the stock is trading at 24 forward P/E.

The current valuation looks rather cheap for NVIDIA which has been trading at higher multiples. However, it remains to be seen whether the stock will get strong support near yearly lows.

The crypto market remains under pressure. Some investors believed that the strong growth of crypto markets would lead to huge demand for NVIDIA products, but the total crypto market capitalization has already declined from $3 trillion to $1.2 trillion.

Meanwhile, traders remain cautious towards higher-PE stocks. While the current valuation of 24 forward P/E may look attractive for NVIDIA, it is not cheap for an “average” stock. In this light, general market sentiment will have a strong impact on the near-term direction of NVIDIA stock.

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