00:05 Speaker A
NVIDIA earnings are dominating the headlines and on today’s stocks in translation, we’re taking a look at how you can play in video stock based on historical probabilities.
00:15 Speaker A
So first up, I’ve shown this chart many times before, but basically, if you were to buy in Nvidia stock right before earnings and you held it for one day, one week, one month, one quarter, one year, this is the return that you might have expected over the last 10 years.
00:27 Speaker A
So we’re looking at the median returns over the last 40 reports, 10 years.
00:33 Speaker A
You can see not much going on one day later, 2%, one week later, 4%, one month later, 2%, but the odds start going up when you hold for longer periods of time.
00:46 Speaker A
At one quarter, you’re looking at a 14% median return and then this is really the focus here. After one year, you get basically saw a doubling of the stock price.
00:55 Speaker A
Now, I want to show you, these were the median returns. I want to show you the win rate or the percent positive for the same time period, 10 years.
01:04 Speaker A
So one-day holdings, uh that was that was positive 60% of the time, one week, 65%, one month, 58%.
01:13 Speaker A
Anything under 70% by the way, I consider to be subpar because stocks tend to go up.
01:18 Speaker A
When you get to one quarter, and remember that’s when we were getting that 14% return, then we see the odds shoot up to 77% and one year later, you are up 83% of the time.
01:29 Speaker A
So it just kind of shows you that you want to be in that buy and hold mode unless you are a very, very nimble trader because some of these some of these shorter time periods are barely better than a coin toss.
01:39 Speaker A
Now I want to show you what the experts are doing. So, this chart goes back a few years.
01:44 Speaker A
In white, we have Nvidia stock price, and in green, we have the median Wall Street price target.
01:53 Speaker A
And as you can see, there’s it’s usually above. that is the price target is usually above the price and uh sometimes Wall Street is playing a game of catchup.
02:03 Speaker A
So, you’ll see like right in here a few times that the stock price actually exceeded that Wall Street target.
02:10 Speaker A
Here too. and the last time we caught up to it was probably a couple quarters ago and you can see there is rather big disparity between the target and the price.
02:22 Speaker A
Over the last 90 days since that last earnings report, Nvidia stock has basically done nothing. It’s just about flat.
02:29 Speaker A
Meanwhile, the average price target or medium price target is up to 237. That is a gain of 19% over that time.
02:39 Speaker A
So the big question is, is price going to once again catch up to those price targets or is there going to be a big disappointment and is that price target eventually going to catch down to the stock price?
02:51 Speaker A
We’ll have to see about that one, but history says, uh at least over the last 10 years and especially the last few years that Nvidia stock probably catches up to that target.
02:59 Speaker A
Now we’re going to take a look at post earnings moves. Now, these are just moves and we’re talking about a range of trading. We’re not talking about up or down.
03:07 Speaker A
So the average daily move in Nvidia stock any given day since its last earnings report is 3.4%.
03:14 Speaker A
Now, what the options market is implying that is expecting over the next day after the earnings are in amounts, tomorrow, uh on Thursday, what is the return or what is the range going to be? 7%.
03:24 Speaker A
So basically more than double that. And then I took a look at the last 10 quarters, so that’s two and a half years, what was that post earnings day move?
03:34 Speaker A
Well, that was actually 10.7%. So we have seen a reduction in volatility over the last uh few quarters here with respect to Nvidia stock.
03:47 Speaker A
So that’s something to keep in mind. We’ll probably see above average volatility in the earnings reaction, but uh that’s also going to be uh probably a maybe double what we’ve seen over the last 90 days on those non- earnings days.
03:58 Speaker A
Now I want to get into the returns. So this is how much money you would actually make. Uh post earnings average return over the last 10 quarters, 3.6%.
04:06 Speaker A
Now, six of those were wins, four of those were losses. So of those six wins, it was a positive uh a return of 9% and of those four negative uh losses, those were uh 4.5% on average.
04:18 Speaker A
So you put it all together, uh Nvidia stock is kind of a tricky one to play sometimes, especially in the short-term. No doubt it has been a long-term winner for a lot of investors here and make sure you check out the earnings later today on stocks on Yahoo Finance Network and tune into the stocks and translation podcast.
04:38 Speaker A
For more jargon busting deep dives, new episodes can be found Tuesdays and Thursdays on Yahoo Finance’s website or wherever you find your podcast.