Nvidia’s Perception Problem, Macy’s Dresses The Part, Broadcom’s Big Bid
The Nvidia Kneejerk
Have mercy! I’ve been waitin’ for Wall Street all day. Have mercy! I’ve been waitin’ for Wall Street all day.
I got my Nvidia (Nasdaq: NVDA) earnings — and my take-home pay.
Is this … ZZ Top? I think?
It’s a deeper cut, sir, but it checks out. Great Ones, there hasn’t been a better Nvidia report since Jesus left Chicago, and Wall Street still … still … didn’t have any mercy on NVDA stock.
So, as the lyrics lyricize … we’re waitin’ for Wall Street to catch up with reality.
Let’s take a look at what went down, shall we?
By the numbers, Nvidia delivered an impressive double beat — with room to spare.
Revenue shot up 46% to reach $8.29 billion, crushing estimates for $8.10 billion. Data center revenue is up an insane 83%, as more and more Big Data companies use Nvidia’s chips to run their server farms, corporate hubs and … umm … everywhere else you store data.
Earnings weren’t too shabby either, coming in at $1.36 per share and topping expectations for $1.29 per share. Not to mention, Nvidia’s gross margins were a healthy 67% last quarter.
Translation? Nvidia’s making bank, even with the rising costs of … well, everything.
By this point, you might be wondering what could’ve soured Wall Street’s view on NVDA so much that it was struck down 10% after the report dropped, hitting a new 52-week low and sinking deeper into stock market oblivion.
See, the problem here isn’t with Nvidia. It’s with Wall Street.
Ohhh, here we go again. Blaming everything but the stock.
No, no, hear me out. You know how we’ve been talking about Wall Street’s perceptions (and expectations) being wildly off-kilter? Like … since the pandemic began? Yeah, about that…
Nvidia expects to bring in $8.1 billion for the current quarter, but Wall Street was expecting guidance for $8.5 billion. My question is: Why?
Wall Street knows that Nvidia pulled out of the Russian market because of … you know, Russia. Analysts should also be well aware of the current COVID shutdowns in China — and both factors weigh on Nvidia’s future guidance.
According to Nvidia, it’s missing about $500 million in revenue this quarter due to Russia and China. Add that back in, and Nvidia would’ve actually beaten guidance estimates.
So what’s the rub, bub? There is literally nothing bad in here for Nvidia’s future. But since other names in the tech investing sphere are getting slammed — sorry, Snapchat investors, but it was a long time coming — investors just threw Nvidia out with the bathwater.
Remember what Great Stuff said amid yesterday’s panic selling?
Lose as little as possible. Be as opportunistic as possible, if you can. That means buying companies with positive cash flow, solid revenue growth and that operate in a sector that will still be here after the s#!% hits the fan.
Companies like some of those in the Great Stuff Picks portfolio: Nvidia, AMD, Walt Disney and Boeing.
Well, well. How do you like those chipmaking apples? (I know, “no one ever says that, Great Stuff.” Yeah, whatever.)
Nvidia’s report proves that the company is growing on all fronts. Yet Wall Street still isn’t keen on that “being reasonable about reality” thing … and Nvidia got mistaken in the crossfire.
I don’t say this much right now due to the market clusterchuck, but this looks like a buying opportunity for Nvidia stock.
And by the looks of it, other investors had the same idea today, with NVDA bouncing 11% off the dip and erasing the report’s negativity.
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What’s this? A rare spot of positivity in the middle of all the market pandemonium? And from a notoriously weak retailer, no less? Why, I never!
In a major twist of fate, Macy’s (NYSE: M) rallied nearly 16% higher today on news the company’s still not dead yet. Alright, maybe that’s a little unfair … but this is Macy’s we’re talking about here.
According to the belle of the department store ball, people shuffled back into shopping malls this year in search of new outfits after ditching all of their old office digs.
Threadbare leggings and holey t-shirts might’ve gotten most of us through the pandemic, but drifter chic ain’t gonna fly around most companies’ CEOs.
And as for resurrecting all those old outfits of boardrooms past? Ha … that’s cute. Three years and several bags of Reese’s Pieces later, not much of my pre-pandemic wardrobe fits me either, so Macy’s’ math checks out.
While the company still expects 2022 revenue to be relatively flat compared to last year, Macy’s now projects higher earnings in the $4.53 per share to $4.95 per share range. (I won’t hurl a bunch of numbers at you today, but that’s higher than Macy’s’ previous guidance.)
With much of the broader market freaking out about inflationary ripple effects and a drop in consumer spending power, Macy’s investors were able to breathe a rare sigh of relief.
I guess sometimes starting from the bottom has its advantages…
OK, so the first one could’ve been a fluke. But two positive stock stories back-to-back? Something seems fishy…
For those of you who have no idea what I’m talking about, Southwest Airlines (NYSE: LUV) shares gained altitude this morning on upbeat second-quarter guidance backed by strong summer travel demand.
A fresh round of first-quarter bookings breathed new life into LUV’s fleet, with overall flying capacity expected to be down just 7% below pre-pandemic levels as we reach the midway point in the year.
Southwest said it also expects revenue to rise 12% to 15% compared to 2019 levels — the benchmark all travel companies seem to live and die by these days. I swear, sometimes I think it’ll be 2030 and everyone will still be looking back in the rear-view mirror at “2019 levels.”
Do planes have back-facing mirrors? Inquiring minds want to know…
Anyway, as you might expect, Southwest investors were heartened by this heaping helping of good news and sent LUV stock soaring a healthy 5%.
Name a better combo than a discount variety store and an economy that’s slowly circling the drain … I’ll wait.
Umm, have you heard of chicken and waffles? Three-day weekends and zero responsibilities? Rainy days and unread books? I could literally do this all day.
You’re right, you’re right! I clearly didn’t think that one through.
Back at the ranch, Dollar General (NYSE: DG) reported fiscal first-quarter earnings that show shoppers are getting more conscientious about how and where they spend their money — with markdown goods helping to ease some this year’s inflationary burden.
Dollar General made $2.41 per share this quarter on $8.8 billion, beating Wall Street’s and even DG HQ’s own expectations. Same-store sales even recovered slightly from the previous quarter, down just 0.1% compared to the 1.2% analysts projected.
Forward-looking guidance also remained upbeat, with Dollar General now expecting net sales growth of 10% to 10.5% for the rest of the year. Investors rewarded the General with a five-star salute, hiking DG stock 12% higher.
You know what they say: On Wall Street, it doesn’t matter what you’ve already done, just what you think you’re about to do next … or something like that.
Semiconductor company Broadcom (Nasdaq: AVGO) continues to expand its stable of next-generation tech, this time making the decision to snap up cloud and software developer VMWare (NYSE: VMW) in a deal worth 61 billion buckaroos.
Well … Broadcom’s will to buy VMWare seems strong, at least.
However, considering several other companies have tried to marry the software firm in the past … only to falter at the altar … we’ll see if this dynamic tech duo really ends up tying the knot. (Let’s just say I’m not buying any wedding presents yet.)
But let’s keep today’s train of optimism chugging along and say Broadcom’s bid goes through. What’s the big deal? How do these two tech giants complement one another?
To start, Broadcom’s business is largely focused on the enterprise server market. While it sells a lot of chips for this industry, they’re always built to someone else’s software specs.
VMWare can change that. With the developer under its business umbrella, Broadcom can tailor its chips to VMWare’s software and get even better performance out of them — giving Broadcom an edge in the server market.
On the flip side, VMWare has seen its profits decline in recent quarters and could use the cash boost from Broadcom. So, regulatory scrutiny willing, it’s a win-win for everyone involved.
For their part, both AVGO and VMW investors kept their acquisition hopes in check today — you know, just in case — with each stock rising a tepid 3%, respectively.
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