BY MARK SEBASTIAN

August 17, 2023

Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.

Have a stock YOU want us to review? Email my team here. – Mark

Hey Traders,

This week we are revisiting Nvidia Corp (Ticker: NVDA).

Last time I talked about it, I mentioned I thought the stock was overpriced…

Clearly, the market thinks I was wrong! Take a look at the chart:

In one year, the stock has gone from 124 to 432. That’s an incredible run.

My issues with the PE of 150 – it expanded to 228.

So what is next for this stock?

Let’s break it down.

The Good

When it comes to AI there is only one name – NVDA.

If AI has the same effect on the market as the internet did in the late 90s, the PE is worth it.

In 1997, split adjusted amazon stock was .07. .07!

Think about that – the stock is now 135 dollars.

An investor in 1997 still holding AMZN stock would be up 1928.57% … that’s incredible.

Here is another positive – the company makes money, unlike AMZN.

NVDA made 1.92 a share over the last 12 months.

So, expensive or not, this is not a house or cards – the stock is actually worth something.

The revenue per share is also not insane and 10.37.

The Bad

Unlike Amazon in 1997, the valuation of NVDA is astronomical. The company is currently worth 1.09 TRILLION dollars.

This makes NVDA the fourth largest company in the world and bigger than the economies of all of South America.

The stock is WAY overdone … and the banks are trying to get you in.

Earnings are going to be on August 23rd.

Normally, NVDA prices in about a 6.58% move. It’s currently pricing in a 10.57% move.

This is a clear sign that traders are looking for something wild.

So far during earnings season, there has been a clear pattern.

The stocks that have run up get smoked on earnings no matter how good the earnings look.

MSFT is a good example:

The stock was so hot into earnings and has been straight down since.

Take a look at an NVDA chart:

It’s gone straight up.

The Verdict

With all the analyst upgrades, I think NVDA is setting up for a very ugly earnings.

I would lighten my holdings if I was long. I’d be prepared for a really bad week for the stock next week.

If they don’t go beyond crushing earnings, NVDA is going to get sold.

Questions about that? Leave a comment below!

Your Only Option,

Mark Sebastian