Here are the takeaways from today’s Morning Brief, which you can register to receive in your mailbox every morning accompanied by:
The weight of high expectations is often a heavy burden to bear.
In life, if you’re a great worker, you’re expected to be a great worker every day. Having a bad day? It’s not allowed, so go take your crap somewhere else.
Sure, a college professor who gave an inspiring speech about leadership at a TED conference 10 years ago and now appears in minute-long clips on your Instagram feed might suggest that it’s okay to have bad days at work, even if you’re a winner.
Trust me, it’s not – and don’t let this social context make you think otherwise.
This same philosophy could be applied to the stock market’s biggest stock: Nvidia (NVDA).
I know you like this transition, Morning Brief readers! Hear me out on this most successful product on the market.
Over the past week, we’ve been reminded of how inflated expectations are for Nvidia and how the stock has entered dangerous waters that many late-comer traders to the Nvidia game have never navigated before .
On June 18, Nvidia’s market capitalization reached a staggering $3.34 trillion. eclipse Microsoft (MSFT) to become the most valuable company in the world. Over the next three trading days, with no apparent fundamental news, the company lost $430 billion in market capitalization.
To give you an idea, Coca-Cola (EAST) market capitalization is $275 billion.
Some people I spoke with told me that people were taking profits on Nvidia early in the second half of the year. Other people I spoke with for my “Opening of bidding“The podcast told me that there are rumors that new competitors are entering Nvidia’s territory, and perhaps the company won’t be as absurdly dominant over the next five years as many predict.
This is all true, but it reinforces the idea that the stock is prone to sudden and unexpected negative sentiment shifts, as it is up 3,000% in five years.
But if you dig deeper, you can see just how intense expectations for Nvidia have become.
Nvidia’s stock now trades at about 21 times (very strong) forward sales, up from 12 times (also strong) two months ago, according to research by Charlie Bilello, chief market strategist at Creative Planning. That’s a significant premium to Microsoft at 12x and Apple (AAPL) at 8x, two tech titans that have strong fundamental performance and are expected to continue to thrive in the years to come.
Nvidia’s stock has recently been trading about 100% above its 200-day moving average, said Jonathan Krinsky, chief market technician at BTIG. Since 1990, the widest spread a U.S. company has ever traded above its 200-day moving average when it was the world’s largest company was 80% by Cisco (CSCO) in March 2000, marking its all-time high. “In other words, Nvidia is in a league of its own,” Krinsky said.
It seems that this is indeed the case.
Similar expectations were applied to chipmaker Micron (IN) before the results are published this week. The stock was criticized due to “on-line” forecasts that failed to meet wild expectations for anything related to AI demand.
And I emphasize the word crazy: On Monday, several sell-side analysts upgraded their estimates and price targets on Micron ahead of the earnings release. As someone who has led a team of equity researchers, I can tell you that this pre-earnings action is not the norm.
This stank of analysts who believed too much in the hype and hoped for a giant increase in the stock in one day.
“When you get a reaction like Micron’s, where the numbers should be good enough to avoid a sell-off, let alone spur a rally, that’s a bad sign – it means expectations are so high that they don’t cannot be exceeded.” Chief Strategist at Interactive Brokers Steve Sosnick said.
Others disagree with my assessment that Nvidia’s pricing is perfect, and that’s absolutely fine. I don’t have a monopoly on good ideas!
“But for mid- to long-term investors, the story still holds when we look at how long they are booking capacity and firming in prices,” said Tematica Research co-founder and chief investment officer. Chris Versace said.
One thing we can all agree on: Nvidia is one of the most successful employees out there, and he won’t be exempt from trying to take a day off if he catches a cold.
Speaking of expensive tech stocks, Amazon stock (AMZN) have increased by 55% over the past year. Questions remain, however, about its culture. WSJ journalist Dana Mattioli discussed her explosive new book “The Everything War: Amazon’s Ruthless Quest to Own the World and Remake Corporate Power” in an episode of the television series “Opening offer” podcast. Listen below.
Auction opening List of episodes
Click here for the latest stock market news and in-depth analysis, including stock-moving events
Read the latest financial and business news from Yahoo Finance
