Nvidia (NVDA) blew up all of its progress following its earnings report on November 15, 2018 dropping nearly 20% from slightly over $200 down to $160. NVDA’s introduction of a new graphics card series sporting chips that aren’t currently supported by any games has seen lower-than-expected sales for those new cards while old cards saw a decrease in sales thanks to Bitcoin and its cryptocurrency brethren tanking over 2018. To make matters worse, NVDA downgraded their forecast for Q4, lowering revenue expectations to $2.65B-$2.75B when analysts were expecting $3.4B. What should shareholders do now? For the moment, do nothing.
 

Current Shareholders

  If you were building a position in NVDA, this is NOT a buying opportunity. Hold tight with what you have. If you will need the invested capital soon (in the next 6-12 months), consider taking some or all off the table after following the Three Day Rule (i.e. hang on until next Tuesday, November 21, at the earliest). If you have a profit and want to avoid further downside take out your cost basis, at minimum. If you’re comfortable with the long-term exposure, let your profits ride. If you’re feeling more conservative, take out as much as will make you feel comfortable.  
 

Interested Shareholders

  If you were considering getting into NVDA, this looks like a huge sale. This is NOT the case. Many analysts consider a bad earnings report (especially one as explosive as this one) to put the stock in a “hands-off” penalty box, of sorts. As tempting as it may be to get in at these levels, the more prudent investor will wait until NVDA demonstrates some good news that growth has returned, typically wait an entire quarter to invest, at least. If you are incredibly aggressive about NVDA’s prospects, it is true that this is a huge discount given that the stock was in the $290s earlier this year (that’s more than a 40% drop). However, NVDA is (was?) a growth stock. When a growth stock gives such glaring signs that it may have tripped up, it can be very difficult for the stock to return to its previous highs.  
 

Stay Diversified

  This absolutely nightmarish earnings report goes to the show the importance of holding a diversified portfolio with positions in a variety of sectors. Although NVDA’s terrible earnings isn’t seeming to have an effect on its semiconductor sector compatriots, only time will tell. And, yes, in case you were wondering, I still have a position in NVDA myself and am definitely feeling the pain. Questions or comments? Leave ‘em below! For more on Nvidia’s earnings, check out MarketWatch’s report by clicking here.  

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