Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Trader Strategy
Access both platforms from your single Saxo account.
Earnings Watch: Nvidia’s crypto slide and thoughts on earnings recession
Peter Garnry
Chief Investment Strategist
Summary: In today's equity note we focus on Nvidia which is reporting earnings next week with revenue expected to drop 18% from a year ago as prices on GPUs are falling due to collapsing demand from crypto miners. The recent fallout of the crypto exchange FTX could put the crypto industry in its longest and deepest winter yet and impact Nvidia's business for a long time. FY2023 revenue expectations are down 22% since April. We also take a look at the potential earnings recession as the margin compression intensified in Q3 and could continue next year.
Can Nvidia avoid the crypto vortex?
The earnings season has lost its impact on the overall equity market, but next week’s earnings do offer plenty of interesting earnings releases. Our key focus is Nvidia which reports FY23 Q3 (ending 31 October) on Wednesday. Analysts expect revenue of $5.84bn down 18% y/y and EBITDA of $2.1bn down from $3.2bn a year go and EPS of $0.71 down 30% from a year ago. Despite Nvidia’s lack of mentioning crypto in their earnings statements everyone knows that crypto mining is a big driver of revenue in recent years. Last time the crypto industry went through a crypto winter with mining operations seizing to exist the 12-month forward revenue expectation plunged the most since the Great Financial Crisis. Nvidia’s shares declined 54% from its peak back in 2018 before hitting the bottom.
This time Nvidia’s shares plunged 66% from the peak in November 2021 to the bottom last month as crypto mining operations are no longer as profitable as before shutting down its operations causing an oversupply of GPUs. This has led to lower prices and inventory writedowns for Nvidia. The current FY2023 revenue estimate is €27.1bn down 22% from its peak in April of $34.9bn. The slowdown in crypto mining and the general slowdown in technology thus likely machine learning applications have reduced revenue expectations by staggering $7.9bn. With the latest FTX implosion which have written about here and here, the crypto winter could be very deep and last much longer than the previous one. This means that there is clearly a downside risk to Nvidia’s outlook.
The list below shows the most important earnings releases next week across our universe of more than 2,000 companies that we track during the earnings season.
- Monday: Meituan, Sonova, Tyson Foods, Nu Holdings, Trip.com, DiDi Global
- Tuesday: Infineon Technologies, Vodafone, Alcon, Walmart, Home Depot, Sea Ltd
- Wednesday: Siemens Energy, Tencent, Experian, SSE, Nibe Industrier, Nvidia, Cisco, Lowe’s, TJX, Target
- Thursday: Siemens, Alibaba, Applied Materials, Palo Alto Networks, NetEase
- Friday: JD.com
The inflation celebration and the incoming earnings recession
Yesterday’s moves across all markets were a sign of the bear market as these moves do not happen during bull markets. What made the moves more spectacular were that they happened following a period of recent risk-on. Listen to our podcast from this morning where we discuss the market reaction across all markets. Everyone is celebrating the lower than estimated headline and core inflation figures, but as we write in our equity note from yesterday the inflation rate is getting entrenched in the services sector, so the last chapter has not been written yet.
As we have recent written about the next dynamic is the margin compression and how it will impact earnings going forward. While the margin compression was evident in Q3 the downward revision to 12-month earnings estimates has been minuscule with the current 12-month earnings drawdown being only 3.5%. This fact makes us still cautious on the equity market.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Equity Outlook: The ride just got rougher
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
China Outlook: The choice between retaliation or de-escalation
Charu Chanana
Chief Investment Strategist
-
Quarterly Outlook
Commodity Outlook: A bumpy road ahead calls for diversification
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX outlook: Tariffs drive USD strength, until...?
John J. Hardy
Global Head of Trader Strategy
-
Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)