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NVIDIA's Stock Awaiting $300 Billion Impact? ETFs in Focus

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Traders in the U.S. equity options market are watchfully waiting for NVIDIA's (NVDA - Free Report) earnings report, expecting it to create a huge shift in the company's market value. Options pricing indicates an anticipated 9.8% swing in NVIDIA's shares following the earnings announcement (which is scheduled today after the market closes), topping share price swings seen in the past three years.

Analysts expect any meaningful changes in earnings to impact NVIDIA's market capitalization by about $305 billion, as quoted on Reuters, published on Yahoo Finance. NVIDIA’s current market capitalization is about $3.11 trillion. The NVIDIA stock is up 166.4% so far this year.

If you want to protect yourself from any huge downside movement, you can try betting on NVIDIA-heavy exchange-traded funds (ETF). ETFs always minimize company-specific concentration risks. Some NVIDIA-heavy ETFs include Strive U.S. Semiconductor ETF (SHOC - Free Report) , VanEck Vectors Semiconductor ETF (SMH - Free Report) , Technology Select Sector SPDR Fund (XLK - Free Report) , Grizzle Growth ETF (DARP) and TrueShares Technology, AI and Deep Learning ETF (LRNZ - Free Report) .

 

Implications of Potential NVIDIA Moves on Wall Street

NVIDIA, well-known for its dominance in artificial intelligence chips, holds significant weight in the broader market. Its year-to-date performance, contributing around a quarter of the S&P 500's gains, indicates its key role. Any big move in NVIDIA shares would cut down the market capitalization of 95% of the S&P 500 constituents, including Netflix and Merck, according to LSEG data, the above-mentioned Reuters article noted.

 

Options Market Sentiment Prior to NVDA Earnings

Options traders are mainly focused on potential upside gains rather than downside risks ahead of NVIDIA's earnings. Market sentiment indicates a 7% probability of the stock surging over 20% by Friday, contrasting with a 4% likelihood of a similar margin of selloff.

There is optimism around NVIDIA earnings, termed "FOMO insurance," which reflects traders' fears of missing out on a rally rather than concerns about losses. We would like to note that NVIDIA's stock volatility remains much higher than that of other trillion-dollar companies.

NVIDIA’s last five years’ growth rate is 54.20% versus 9.10% growth recorded by the underlying industry Semiconductor – General. NVIDIA’s next five years’ growth rate is expected to be 37.60% versus 16.80% projected for the underlying industry.

 

Earnings Whispers for NVDA

NVIDIA currently has an Earnings ESP of +1.23% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

 

Broker Rating on NVDA

NVIDIA currently has an average brokerage recommendation (ABR) of 1.20 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 40 brokerage firms. The current ABR compares to an ABR of 1.25 a month ago based on 40 recommendations.

Of the 40 recommendations deriving the current ABR, 35 are Strong Buy and two are Buy. Strong Buy and Buy, respectively, account for 87.5% and 5% of all recommendations. A month ago, Strong Buy made up 85%, while Buy represented 5%.

 

Price Target of NVIDIA

Based on short-term price targets offered by 40 analysts, the average price target for NVIDIA comes to $142.48 ahead of earnings release. The forecasts range from a low of $90.00 to a high of $200.00. The average price target represents an increase of 11% from the last closing price of $128.30.

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