NVIDIA Shares Rally Despite Missing Estimates

NVIDIA (NASDAQ: NVDA) shares are trading up $0.62 or 6.5% to $9.50 after reporting second quarter earnings.  For the quarter, the company reporting earnings per share of $0.03 compares to estimates of $0.11, on revenues of $811.2 million against estimates of $831.88.

Two weeks ago, NVIDIA warned shareholders that the company would miss estimates on today’s earnings report.  Previously, management expected revenues in the $950-970 million range; however, the revision called for revenues in the $800-820 million range.  Since the warning, shares had shed 14% before today’s after-hours surge. Investors had nearly two weeks to digest the disappointing quarter, and the earnings release in and of itself should have caught no one off guard.

Management now sees revenues for the third quarter rising 3 to 5 percent over the second quarter’s result.  That puts the range between $835-$852 million range, slightly lighter than what analysts were expecting.

Coming into today’s report, NVIDIA had been the single most down stock in the S&P 500 year-to-date.  Not exactly the type of leadership investors would like to see in a stock.  Considering shares are trading higher despite unquestionably weak earnings, and what might be construed as disappointing guidance could indicate that the stock has capitulated to the downside for the time being.  NVIDIA has an intriguing balance sheet, as the company has no debt and $2.48 billion in current assets.  This amounts to 48% of the company’s market cap.

This morning, shares of NVIDIA bottomed out at $8.65.  This was the lowest level for the company’s stock since May of 2009, when shares dropped down to $8.33.

NVDA looks to capitulate.

Disclosure: No position.