Stocks took another tumble yesterday. Led by a steep decline in tech, the S&P finished the day down approximately 1.7%, while the Dow wound up down about 1.4%. But folks, there’s no need to panic. In today’s blog, I’ll reveal why…
Interestingly, one of my favorite tech stocks ignited yesterday’s downturn. NVIDIA (NVDA) announced yesterday morning that, in light of the recent fatal accident involving an autonomous vehicle and a bicyclist, it was stopping its self-driving car tests.
Now, this occurrence, although tragic, should have very little effect on NVIDIA’s overall performance as a company.
NVIDIA is still a leading computer graphics company, making graphic processing units (GPUs) for consumers and businesses. From video games to professional visualization, datacenter and blockchain applications, NVIDIA’s graphics cards enhance the processing capability of its users’ computers. The company has been in the computer graphics business for more than two decades. It invented the GPU in 1999, and currently, the company owns over 7,300 patents relating to computer graphics, the largest portfolio of its kind.
In fact, when NVIDIA released earnings and sales results on February 8 for its fourth quarter in fiscal year 2018, it crushed the consensus estimate. Company management noted that NVIDIA “achieved another record quarter, capping an excellent year,” and I agree.
Fourth-quarter net income surged 70.7% year-over-year to $1.12 billion, or $1.78 per share, compared with $655 million, or $0.99 per share in the same quarter a year ago. Analysts were expecting earnings of $1.16 per share, so NVDA topped estimates by 53.5%. Fourth-quarter revenue soared 34.1% year-over-year to $2.91 billion, which topped estimates for $2.68 billion by 8.6%.
For fiscal year 2018, NVIDIA reported total revenue of $9.71 billion, up 40.5% from $6.91 billion in fiscal year 2017. Also, full-year adjusted earnings per share increased 87.6% year-over-year to $4.82. These results also beat analysts’ estimates for earnings of $4.22 per share on $9.48 billion in sales.
The reality is that Wall Street simply used yesterday’s headline as an excuse to drive tech stocks lower in general.
Remember last Friday when the S&P 500 and Dow both retested their February 8 lows? Well, the Nasdaq didn’t retest those lows yesterday. So, NVDA’s headline was simply the market’s latest excuse to hit tech stocks and decline.
The bottom line: We remain in a “washing machine” market, and stocks are continuing to slosh around. But first-quarter earnings announcement season is right around the corner. Thanks to corporate tax reform, first-quarter results will be the best earnings in my lifetime—and I’m expecting wave-after-wave of positive earnings to dropkick and drive our stocks higher.
So, I encourage you not to panic on down days like yesterday. View any dip in fundamentally superior stocks as a great buying opportunity and get ready for a stunning first-quarter earnings season.