Chip Stock Cooling From Record Highs After Analyst Dowgrade

That company has an earnings report due out next Wednesday

Deputy Editor
Nov 12, 2021 at 9:19 AM
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The shares of Nvidia Corporation (NASDAQ:NVDA) are taking a step back this morning, last seen down 1% at $300.76, following a downgrade from Wedbush to "neutral" from "outperform." The analyst did lift its price target to $300 from $220, but warned that its valuation was too high, as its trading at 55 times the company's 2024 number. 

Heading into today, the brokerage bunch was overwhelmingly bullish, with 24 of 26 calling the stock a "buy" or better. The 12-month consensus price target of $253.69, on the other hand, is a 15.6% discount to last night's close. 

The chip stock staged an impressive bounce off its 100-day moving average in early October, which quickly took it past former pressure at the $230 level. Now, the security is cooling from its Nov. 9 all-time high of $232.10, but still sports a 132.8% year-over-year lead, with every major trendline in place as potential support. 

The firm is set to enter the earnings confessional after the close next Wednesday, Nov. 17. NVDA has a mixed history of post-earnings moves over the past two years, enjoying four positive returns, three negative, and one flat. This time around, the options market is pricing in an 8.6% next-day swing, which is much higher than the 3.3% move the security has averaged during its past eight post-earnings sessions, regardless of direction. 

Meanwhile, short-term options traders have been more put-biased than usual. This is per NVDA's Schaeffer's put/call open interest ratio (SOIR) of 1.15, which stands higher than 80% of readings from the past year. 

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