NVIDIA Earnings Preview: Strategy Notes for Q3 Report

19 nov

Pre-Earnings Strategy: First things first—know the key numbers and the market expectations. But keep in mind, NVIDIA’s revenue recognition can get tricky, so don’t be surprised by unpredictable results. This is why a solid strategy, proper positioning, and downside protection are essential going into the report.

1. Core Numbers & Expectations
Where do Buy-Side Expectations Come From? NVIDIA has been beating guidance by around $2 billion each quarter and then raising guidance by another $2 billion (last quarter they raised it by $2.5 billion).

For Q3, the guidance given in Q2 was 32.5B. Based on the trend, buy-side expectation bumps that up by another 22B, so the real expectation for Q3 is 34.5B.

Looking ahead to Q4, buy-side is expecting 39B (Q3 actual 34.5B + 2.5B + another 22B). To make the buy-side comfortable with this, the Q4 guide needs to come in at least at 38B (realistically, even 37B could suffice).

Key Takeaway for a Big Beat: Q3 revenue needs to hit 34.5B, and Q4 guidance should be at 38B, with Blackwell contributing over 55B in Q4.

2. What the Analysts Think
This is a mega-cap stock, so pretty much every sell-side analyst has a report. But let’s just focus on the key voices from Goldman (Hari), UBS (Arcuri), and Morgan Stanley (Moore), aka the “HAM Trio.”

For Q3:

Moore: Bearish—expects 32.5B
Hari & Arcuri: Neutral-Bullish—expect around 34.3B

For Q4 Guidance:

Moore: Bearish—expects 35.3B
Hari: Bullish—expects 39.2B
Arcuri: Bullish—expects 38.9B

3. Q4 Blackwell Revenue Breakdown
Management previously mentioned Q4 Blackwell revenue could be “several billion.” If it’s $2-3B, that’s below expectations. $5-6B would be a strong beat.

Moore: Expects $5-6B (bullish on Blackwell)
Arcuri: Expects only 33B (more conservative)

4. Summary of Analyst Divergence
There’s a clear split among the top analysts, particularly around the Q4 guidance. This divergence sets up potential volatility.

5. Trading Strategy
1. Pre-Earnings Positioning: If the stock dips ahead of earnings, consider adding to the position. If there’s a rally, trim some to lock in profits.

2. Post-Earnings Reaction: If it tanks, be ready to add more, since Q1 of FY25 is expected to be a breakout quarter.

3. Hedging with Options: Use options to protect existing stock positions—don’t go into earnings unhedged.

Implied Move Post-Earnings:
The options market is pricing in about a 9% move, which puts the stock between $128-$153 (current price is around $141).

Options Strategies
Bullish Play (Betting on a Big Rally): Buy calls, but keep it small—treat it as a high-risk, high-reward play. If it goes to zero, it won’t hurt too much.

Lower-Cost Bullish Play: Consider a call spread (buy a lower strike call, sell a higher strike call). This caps your upside but reduces the cost.

Protecting Existing Long Stock Positions: Use covered calls. If the stock tanks, you get some downside protection from the premium. If it rallies, you still make money up to the strike price, plus the premium collected. The downside is losing the stock if it gets called away above the strike.

Want to Buy the Dip After Earnings? Sell puts. If the stock drops, you get assigned shares at a lower price and keep the premium. If it rallies, you pocket the premium.