🔬Nvidia... in Charts!
"In the short run, the market is a voting machine but in the long run, it is a weighing machine."
- Benjamin Graham
"Some m**********rs are always trying to ice skate uphill."
- Blade
Medium sucky day for the big US markets with the S&P 500 -0.3% and Nasdaq -0.2%, with some laggard companies reporting, but mostly the market was holding its breadth for Nvidia’s post-close reporting to gauge where Tech sentiment is moving.
3 of 11 sectors closed higher, led by Health Care and Industrials (both +0.2%). Energy (-1.8%) got it the worst, as crude oil settled down 1.4%.
Minutes for the Fed’s April 30th/May 1st meeting showed most participants believed inflation will return to 2% target in the medium term but noted ‘disappointing’ data in recent months had not increased confidence.
Notable companies:
Petco (WOOF) [+17.6%] Q1 declines came in less than expected, Q2 guide better, highlighted repositioning strategy. Bit of a relief rally with the stock down over 20% this year.
lululemon athletica (LULU) [-7.2%] Announced departure of Chief Product Officer Sun Choe and organizational changes to make corporate structure more integrated.
Viasat (VSAT) [-16.5%] Weak reporting, notably flat guidance for YoY revenue growth.
More in ‘Market Movers’ below.
Street Stories
Nvidia in Charts!
Nvidia reported after close yesterday and by all accounts it was another stand-out quarter. The stock is up +6.1% pre-market and, since enough has already been written about it, I’ll just breeze through the highlights:
Q1 EPS: $6.12 vs. Wall Street consensus for $5.60 [+9.3% BEAT]
Q1 Revenue: $26.0 billion vs. Street est. for $24.6 billion [+5.7% BEAT]
Q2 Revenue Guidance: $28.0 billion vs. Street at $26.6 billion [+5.3% BEAT]
Anywhoo, I thought it’d be interesting to highlight a few of the incredible feats Nvidia has mustered these last few years. Pitter patter, let’s get at er!
1) Despite high expectations, the company crushes estimates
Nvidia hasn’t missed a quarter on Revs in years, and only Q3 2023 stands out as a time in recent memory that they missed on EPS. CEO Jensen Huang gets a gold star for managing the Street’s expectations.
2) Monster Revenue Growth
Nvidia’s Q1 revenue clocked in at $26.0 billion, placing it in 33rd place amongst its US peers (albeit, at a generally much higher margin). More interestingly, is that revenue is up a whopping $18.9 billion compared to their Q1 last year.
Sometime I feel that the sheer scale of these numbers gets lost on people, so let me give you a ‘for instance’: Last year they added more revenue than the entirety of PepsiCo’s 100+ asset portfolio. Or 25% more than the whole of Morgan Stanley, one of the world’s biggest banks with an 89 year track record.
3) Gross Gross Margins
When it comes to gross margins, not all Tech companies are created equal. Some sell software at a virtually zero dollar marginal cost, while others manufacture and sell equipment at a high variable cost per unit.
Nvidia does have software, I guess (shout out to Cuda!), but they are a physical chip company first and foremost. The fact that they had a Q1 gross margin of 76% is nothing short of miraculous (the company is guiding for 75.5% (+/- 50bp) in Q2). Especially impressive for a company that doesn’t actually manufacture any of the chips they sell.
For context, their lowly semiconductor peers only average a gross margin of 45%.
4) Not Your Father’s Gaming Company
If you were like me, you grew up looking at Nvidia as the premier graphics chip company (and bought GeForce series cards to play CS and Unreal Tournament). This may have been true for the vast majority of Nvidia’s 31 year history, but this abruptly stopped being the case last year (Nvidia’s fiscal 2024).
As late as Q4 2022, Gaming was still the largest division on Nvidia’s books. Now, it’s basically a rounding error for the company.
Joke Of The Day
Teacher: "Anyone who thinks they’re stupid may stand up!"
*Nobody stands up*
Teacher: "I'm sure there are some stupid students over here!"
*Little Johnny stands up*
Teacher: "Ohh, Johnny you think you're stupid?"
Little Johnny: "No... I just felt bad that you're standing alone..."
Hot Headlines
CNBC / Most Americans falsely think the U.S. is in recession, poll shows. The Guardian/Harris poll showed 56% of respondents believing that the U.S. is currently in a recession. Beyond the potential impact to consumer behavior, 58% of respondents stated that they believed President Joe Biden is responsible for what they see as an economic downturn, which could have a significant impact with a US election only six months away.
Reuters / US crude oil stockpiles rise unexpectedly according to the US Energy Information Association (EIA). Inventories rose by 1.8 million barrels in the week to May 17th to a total of 458.8 million barrels worth. This comes as analysts were forecasting a decline of 2.5 million barrels.
Bloomberg / BuzzFeed shares jump as former Presidential candidate Vivek Ramaswamy takes stake, seeking strategy talks with Board. His firm, Strive Asset Management, announced a 7.7% stake in the company, worth about $6.8 million. The company, once worth $1.1 billion, is now worth about $106 million after the recent pop.
I wonder if the analysts that valued the company in the billions only a few short years ago had DCF line items for ‘stupid quizzes’ and ‘Taylor Swift memes’.
Axios / WSJ-parent News Corp. strikes content licensing deal with OpenAI. The news industry has split over whether to work with or challenge AI firms - and the Journal's biggest rival, The New York Times, opted to sue OpenAI and its parent Microsoft instead of striking a deal.
Reuters / Fed shifts talk to 'scenarios' as policy grows less certain. The Fed has pivoted away from explicit guidance about the likelihood of interest rate cuts this year, as Chairman Powell and other Fed officials shift focus to near-term paths that the economy might be moving towards, adding what their likely reaction would be to each case. Ie: Don’t hold your breath.
Trivia
Today’s trivia is on Intel.
When was Intel founded?
A) 1968B) 1951
C) 1980
D) 1991
Who were the co-founders of Intel?
A) Jack Kilby and Cecil GreenB) Robert Noyce and Gordon Moore
C) Curtis Priem, Chris Malachowsky and Jensen Huang
D) Larry Page and Sergey Brin
Intel’s highest annual revenue to date was in 2020. How much was it?
A) $58 billion
B) $182 billion
C) $78 billion
D) $203 billionIntel's famous advertising jingle, "Intel Inside," was introduced in what year?
A) 1981B) 1991
C) 2000
D) 1997
(answers at bottom)
Market Movers
Winners!
Petco (WOOF) [+17.6%] Q1 comps declined less than expected, EBITDA better, GM 100 bp ahead of consensus, Q2 guide better, highlighted repositioning strategy; big YTD underperformer, down over 20%.
Moderna (MRNA) [+13.7%] Vaccine makers rallying after Australia's first human H5N1 avian flu case; raises questions on ramping vaccine production.
Analog Devices (ADI) [+10.9%] Fiscal Q2 results better, guided Q3 above, beat despite macro and inventory headwinds; believes inventory rationalization stabilizing, optimistic for cyclical recovery in Q3.
Tandem Diabetes Care (TNDM) [+4.2%] Upgraded to buy from neutral at Citi; highlighted Mobi ramp and likely end of negative revision cycle.
TJX Cos. (TJX) [+3.5%] Q1 EPS beat, revenue in line; comps slightly below due to Marmaxx and HG softness; Q2 EPS and comps guidance light, FY24 EPS guidance raised; margins beat across all segments, comp sales growth driven by customer transactions.
Shopify (SHOP) [+3.0%] Upgraded to buy from neutral at Goldman Sachs; cited durable revenue growth opportunities and significant technology moat; YTD selloff offers better entry point.
Losers!
Viasat (VSAT) [-16.5%] FQ4 EBITDA and revenue better; Satellite Services segment revenues below consensus; headwinds from Boeing aircraft delivery delays; analysts focus on flat y/y revenue growth guidance for FY25.
Toll Brothers (TOL) [-8.5%] FQ2 EPS and net income beat with help from a land sale; homebuilding GM weak; deliveries and net contracts better, backlog below on units and value; concern about reaffirmed FY GM guide, implying weak H2.
Target (TGT) [-8.0%] Q1 earnings light, revenue in line; comp decline level with consensus, lagged strong Walmart comp results; Q2 EPS and comp guidance below Street; noted decline in discretionary categories but some improved trends vs prior quarters.
Hims & Hers Health (HIMS) [-7.9%] Downgraded to neutral from buy at Citi; little upside after recent 20% jump post-GLP-1 announcement, cautious until opportunity durability becomes clearer.
lululemon athletica (LULU) [-7.2%] Announced departure of Chief Product Officer Sun Choe; organizational changes to make corporate structure more integrated.
Photronics (PLAB) [-6.9%] Fiscal Q2 revenue and EPS light; guided below for Q3; positive seasonality trends offset by headwinds from Chinese New Year and Taiwan earthquakes; slower recovery in order rates.
CAE Inc (CAE) [-5.2%] Announced re-baselining of Defense business and impairments; issues with fixed price contracts resulted in C$700M charges; moving Civil Aviation head Nick Leontidis to COO role; prelim adj EPS of C$0.12 negatively impacted by charges.
Garmin (GRMN) [-5.1%] Downgraded to underperform from neutral at Bank of America; cited extended valuation after 32% YTD gain, shares now in line with premium tech names; cautious on anticipated consumer pullback.
Market Update
Trivia Answers
A) Intel was founded in 1968.
B) Intel was founded by Robert Noyce and Gordon Moore.
C) Intel’s 2020 revenue was $78 billion.
B) ‘Intel Inside’ debuted in 1991.
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