2 Stocks To Buy In February And How Nvidia Earnings Could Impact US Stocks
Discover how Nvidia earnings could impact US stocks as Wall Street braces for potential market shifts. Also explore the 2 stocks that you should buy this February.
Author:Habiba AshtonReviewer:Emmanuella SheaFeb 20, 20243.1K Shares43.6K Views
Wall Street is growing increasingly uneasy about an options-driven momentum trade that has helped push the S&P 500 index into record territory.
As demand for bullish call options surges to its highest level in years, some analysts have set their sights squarely on Nvidia Corp.’s Wednesday earnings report, warning that Nvidia earnings could impact US stocks.
Analysts said it could be the catalyst that slams the brakes on this trade, potentially reversing a substantial amount of the market’s rally over the past four months.
Nvidia's Earnings Report And Market Jitters
"The mere fact that the earnings report has passed could be enough to sink the main U.S. stock-market indexes due to the internal dynamics of the options market — even if Nvidia’s results satisfy Wall Street’s expectations," several derivative-market experts told MarketWatch.
According to FactSet, analysts expect Nvidia to report earnings per share of $4.59, an increase of more than 700% from the same quarter last year.
"Once Nvidia’s earnings report has passed, implied volatility across the options market is likely to decline," said Brent Kochuba, founder of SpotGamma. "This would be a typical reaction: implied volatility rises when investors see potentially market-moving events ahead that they want to hedge against, or speculate on. The opposite often happens when these events pass the market by."
Nvidia And The Momentum Trade
Nvidia's stock surge has been a focal point of the momentum trade, with aggressive call buying driving much of its advance. Michael Kramer, a longtime independent stock-market analyst, expressed concerns about the market's heavy reliance on Nvidia.
"The market in my opinion has placed a gigantic bet on one company," Kramer said. "If Nvidia doesn’t guide up significantly, what is going to keep this thing going higher?"
2 Stocks To Buy Among The "Magnificent Seven" Stocks: Nvidia And Amazon
- Nvidia
- Amazon
Among the "Magnificent Seven" stocks, Nvidia and Amazon stand out as solid picks for February. Nvidia has been riding the growth in artificial intelligence (AI), with its share price soaring by 239% over the last 12 months. The stock remains attractively valued relative to its underlying business growth, with analysts raising their annual revenue estimates for the next few years.
"Analysts are raising their annual revenue estimates for Nvidia for the next few years, even though growth expectations were already sky-high for the GPU leader," Yahoo Finance reports.
Amazon, on the other hand, continues to strengthen its position in e-commerce and cloud services. Its improving growth in e-commerce and investments in AI technology bode well for its future performance.
According to Yahoo Finance, "Some might argue that AI technology could make it easier for consumers to search the web and find the products they want at other retailers, which could hurt Amazon in the long run. However, this underestimates the human tendency to stick with trusted brands."
Market Outlook
While momentum has propelled stocks higher, concerns linger about the sustainability of this trend. The pace of the rally may not be sustainable in the long run, with potential headwinds like Nvidia's earnings report looming.
"Stocks aren’t trading on earnings momentum. They are trading on multiple expansion," said Michael Kramer.
As investors brace for Nvidia's earnings and assess market dynamics, the coming weeks could offer valuable insights into the trajectory of U.S. stocks.
Habiba Ashton
Author
BCS Growth Fund (Israel) L.P., a private investment fund specializing in investments in technologically focused businesses with high growth potential, employs Habiba as an analyst. Mrs. Ashton served as an analyst and information manager at the Israel International Fund, the first Israeli venture capital fund designed specifically for Japanese corporate investors, prior to joining BCS. Habiba graduated with honors from Israel's College of Management with a B.A. in Business Administration.
Emmanuella Shea
Reviewer
Emmanuella Shea is a distinguished finance and economics expert with over a decade of experience. She holds a Master's degree in Finance and Economics from Harvard University, specializing in financial analysis, investment management, and economic forecasting. Her authoritative insights and trustworthy advice have made her a highly sought-after advisor in the business world.
Emmanuella’s commitment to excellence is evident in her ability to provide clear, actionable guidance, empowering individuals and businesses to thrive. Outside of her professional life, she enjoys exploring diverse cuisines, reading non-fiction literature, and embarking on invigorating hikes. Her passion for insightful analysis and reliable guidance is matched by her dedication to continuous learning and personal growth.
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