Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, discuss Nvidia’s beat on earnings, their march towards $2trillion market cap, and how as earnings forecasts rise, even though the stock has made new highs, forward PE ratios go lower. Then, they explore what the options market via implied volatility was forecasting for an Nvidia move post earnings. Later, they review a comparison between the S&P 500 Index annual return vs the EPS growth to see if there is any relationship. Hint, it’s not too correlated even when they compare the current year market performance against the 1 year forward actual earnings. All that and more will be explained including some recommendations.
Nvida’s stock is rising while its forward PE just got cheaper
Nvidia’s recent earnings beat including EPS growth, revenue growth, and gross and net margins
What would it take for Nvida to overtake Microsoft as the largest company in the S&P 500?
Implied move post earnings based on the implied volatility of the options market
Price of the at the money long straddle on Nvidia the afternoon of earnings
Regression analysis of S&P 500 Index annual return vs EPS growth
Correlations between market returns and earnings growth
Comparing correlations with same year market returns vs same year and 1 year forward EPS
Markets are forward looking
Probability of Nvidia reaching $3.06T in market cap in one year per options market
Mentioned in this Episode:
Where returns come from see start of page 23 in Semper Augustus group letter
https://static.fmgsuite.com/media/documents/db64b928-53d6-43a9-a4d0-a9d2f69f76ba.pdf
Previous Week’s Podcast:
Put & Call Implied Volatility Mismatch? | US Dollar vs S&P 500 Correlation | Sticky Inflation | Japan Recession | Explaining Why Stocks Go Up (or down)https://podcasts.apple.com/us/podcast/put-call-implied-volatility-mismatch-us-dollar-vs-s/id1432836154?i=1000645873203
Jay Pestrichelli’s book Buy and Hedge https://amzn.to/3jQYgMt
Derek’s new book on public speaking Effortless Public Speaking https://amzn.to/3hL1Mag
Derek Moore’s book Broken Pie Chart https://amzn.to/3S8ADNT
Contact Derek derek.moore@zegafinancial.com