NVIDIA's Earnings Were Fantastic -- and Its 5.3% Stock Correction Was Meaningless

NVIDIA's Earnings Were Fantastic -- and Its 5.3% Stock Correction Was Meaningless

I was amused at some of the descriptions of NVIDIA (NASDAQ: NVDA) stock correcting 5.3% on Friday after the graphics chip maker released terrific fiscal second-quarter 2018 results -- revenue jumped 56% and adjusted earnings per share soared 91% -- after the market closed on Thursday. One would think the sky was falling in.

This is a stock that had returned nearly 55% in 2017 and 181% over the one-year leading up to the earnings report. A correction of 5.3% in such a stock is akin to a ripple in a body of water that just experienced a massive wave. Friday's, eh-hem, "plunge" merely took the stock back to the level it was at just one month prior. After the post-earnings decline, NVIDIA stock has returned 46.5% and 168% in 2017 and over the last year, respectively, through Friday. 

The scenario wasn't surprising: NVIDIA stock was priced for perfection going into earnings, so some short-term traders pulled the plug when the company didn't deliver what they considered a flawless report. NVIDIA blew by Wall Street's earnings estimates. The main reason for the stock drop was almost surely that revenue in the data center platform increased just 2% from the first quarter -- but there was a legitimate reason for this light sequential growth, as we'll get to in a moment. 

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Source: Fool.com