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Use Any Weakness To Buy Nvidia’s Stock
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It’s Nvidia’s (NVDA) world and everybody else is just living in it. After the company reported earnings on Wednesday, its stock dropped after hours. Sometimes when we don’t want to be influenced by emotion, we try not to look. In fact, sometimes we’ll set a limit order in our brokerage account to buy on weakness. Weakness being whatever price you think is too low to pass up. However, in NVDA’s case, only doing this would mean you’re not buying on strength. And, as we have been discussing recently, with tech stocks such as NVDA, history shows that buying on the way up is a solid strategy. Therefore, in our view, you set automatic weekly, bi-weekly or monthly investments into NVDA no matter the price. You set a limit order to buy on weakness. And, if you have extra cash and don’t have anything else pressing on your watchlist, buy more. Just as long as you’re also diversifying in other stocks (think other tech names, dividend payers and broad-market ETFs). Because the only thing Nvidia is guilty of — if anything —is not living up to sort of absurd expectations. Here are the highlights from the company’s quarterly earnings report:
So, Nvidia actually beat on two of the big headline numbers. In a big way. But here’s where the trouble comes and why investors punished the stock a little bit during after hours trading on Wednesday. Typical market reaction. So typical. Too typical. We have seen it time and time again.
So, growth is slowing, but c’mon. As for AI—
Nvidia also announced an authorization to buy back $50 billion worth of its shares. It ended the quarter with $34.8 billion in cash, up 10.8% from last quarter and up from just under $26 billion last year. This company is a powerhouse. As we said at the outset, buy more. To a small, yet meaningful extent, any weakness in NVDA reminds us of how investors used to treat a company we still have a soft spot for in our hearts — Apple (AAPL). The Juice reviewed old Apple earnings reports and saw that when that company faced a similar situation, its stock took a short-term drop only to fully recover, and then some. Of course, Apple’s revenue and sales growth was never like we have seen from Nvidia recently, which actually makes us even more bullish on Nvidia. What we’re seeing from these guys is just insane. In July, 2021, Apple reported record quarterly revenue of $81.4 billion (more than Nvidia) and annual growth rate of 36% (not nearly as much as Nvidia). At the time, Apple’s stock dropped about 4% in the few days post-earnings. Within a week it rebounded and, since that time, it’s up approximately 52%. We remember several times where similar things happened to Apple and other tech companies facing lofty expectations. Expectations only placed upon them because of their incredible performances. This is why The Juice says, keep buying NVDA no matter what. And if you find a dip, buy more.
The Bottom Line: It’s a short and sweet bottom line today. Post-earnings moves are often the best opportunities for long-term investors. Wall Street sets expectations. Companies such as Nvidia beat them handily. Then, Wall Street acts as if they did something wrong. Granted, we think most good analysts will come out and say any downside is likely overdone. We’ll see. All we know is that there’s big money out there that’s not satisfied. So much so that they’re taking profits. Never a terrible thing do, but we also think if you abandon NVDA now, you’re going to miss a ton of upside in the months and years to come. |
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