NVIDIA: Zacks’ Bear of the Day Play

We’ve been hearing about the death of the PC for years now. Surprisingly those archaic box machines have held up pretty well considering the onslaught of new products. Tablets, Smart Phones, Phablets, Smart Watches, the list goes on and on. Still, a quarterly downdraft in PC shipments in Q1 dragged down many stocks that align their fate to the PC business. While not as closely tied to the PC segment as Intel (INTCAnalyst Report) or Advanced Micro Devices (AMDAnalyst Report), today’s  “Bear of the Day” felt the pain from the wait for Win10.

NVIDIA (NVDAAnalyst Report) was once one of my favorite stocks. I personally use an NVIDIA card in my home PC as well as my laptop. They are the standard by which graphics processing units or GPUs are measured. Their main competition in the space, AMD, takes a back seat on nearly every metric aside from price. A characteristic NVDA attacked when it announced the pricing of its flagship GTX 980 and the rest of its 900 series.

NVDA missed Q1 2015 estimates, coming in at 24 cents EPS versus our Zacks Consensus Estimate of 26 cents EPS. This was the first quarterly miss for NVDA in five years. The miss wasn’t as troubling as the weak Q2 revenue guidance. NVDA expects to see sales at $990 million to $1.03 billion, well below estimates of $1.18 billion.

The news prompted analysts to drop their earnings estimates for the current quarter, next quarter, current year and next year. The bearish activity has slashed consensus across the board over the last seven days. The most dramatic cuts affect the current year and next year’s numbers. Twelve analysts have revised downward, moving current year consensus from $1.20 down to 89 cents while next year’s numbers have dropped from $1.31 to $1.14.

You can see the huge spike in volume for NVDA shares over the last several days with Monday’s volume approaching 28 million shares trading hands. The recent drop in the stock price has taken the Commodity Channel Index all the way down to -370. Now the stock is retesting the lows of March. Should that level of support be broken the next likely support sits at the February low on the shy side of $19. But with a harsh technical picture and increasing volumes, you may want to let this play itself out before looking to jump in long.


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