Nvidia To the Moon | Implied Volatility and Earnings | Earnings and Markets Have Low Correlations? | Nvidia Cheap?

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

www.zegafinancial.com