Investors Still Love Industry Leaders Now

It’s a challenging market, but a few themes have been playing out in recent weeks. Great companies are holding up better than lower-quality ones in the same industry. And even with all the uncertainty out there right now, investors are willing to buy great companies well off of last year’s highs.

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  • That theme is playing out this earnings season. Companies that have been reporting poor numbers may be selling of, but investors have been swooping in to buy.

    One such players is graphics processing giant Nvidia (NVDA). The company’s quarterly numbers came in poorly – but the company provided a warning ahead of time. A slowdown in gaming and cryptocurrency mining is taking some of the steam out of the company’s earnings, but many analysts still see the company as a buy now.

    That’s because tech trends can change, and a number of technologies are incorporating GPUs rather than CPUs to process more data quickly. That bodes well for industry-leading Nvidia.

    Action to take: Shares are a bit pricey at 47 times earnings, but are down from 92 times earnings last year. And even with a slowdown, revenue is still up 46 percent over the past year. Investors may like shares here, and up to $185. The stock even pays a 0.01 percent dividend.

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  • For traders, the stock’s move higher after its poor earnings will likely continue. The January 2023 $215 calls, last going for about $9.70, can likely deliver a further mid-double-digit gain from here on a move higher in shares.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.