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Nvidia Is Still Cheap Ahead of Earnings Next Week - Put Premiums are High and Worth Shorting

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Nvidia Inc (NVDA) stock still looks undervalued based on its powerful free cash flow and FCF margins. The company will release its earnings next Wednesday, May 22, for its fiscal Q1 2025 ending April ...

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The company will release its earnings next Wednesday, May 22, for its fiscal Q1 2025 ending April ...</p>\n\n<a href=\"https://www.barchart.com/story/news/26200008/nvidia-is-still-cheap-ahead-of-earnings-next-week-put-premiums-are-high-and-worth-shorting\">Source Link</a>\n\n</div>\n","source":"barchart_highlight","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Nvidia Is Still Cheap Ahead of Earnings Next Week - Put Premiums are High and Worth Shorting</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nNvidia Is Still Cheap Ahead of Earnings Next Week - Put Premiums are High and Worth Shorting\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-05-15 01:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://www.barchart.com/story/news/26200008/nvidia-is-still-cheap-ahead-of-earnings-next-week-put-premiums-are-high-and-worth-shorting><strong>Barchart</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Nvidia Inc (NVDA) stock still looks undervalued based on its powerful free cash flow and FCF margins. The company will release its earnings next Wednesday, May 22, for its fiscal Q1 2025 ending April ...</p>\n\n<a href=\"https://www.barchart.com/story/news/26200008/nvidia-is-still-cheap-ahead-of-earnings-next-week-put-premiums-are-high-and-worth-shorting\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0234572021.USD","symbol_name":"高盛美国核心股票组合Acc","start_time":0,"source_url":"https://www.barchart.com/story/news/26200008/nvidia-is-still-cheap-ahead-of-earnings-next-week-put-premiums-are-high-and-worth-shorting","article_id":"2435954173","we_media_id":null,"thumbnails":["https://media.barchart.com/contributors-admin/common-images/images/Tech%20(Ecommerce%2C%20Social%20Media%2C%20etc.)/shutterstock_1742705531.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2435954173","pubTimestamp":1715709070,"sourceInfo":{"source_id":"barchart_highlight","name":"Barchart"},"weMediaInfo":null,"summary":"Nvidia Inc  stock still looks undervalued based on its powerful free cash flow and FCF margins. The company will release its earnings next Wednesday, May 22, for its fiscal Q1 2025 ending April 30. As a result, its put option premiums are now very high from speculators that expect NVDA to fall. That makes shorting out-of-the-money  puts attractive as an income play, especially for existing investors in the stock.NVDA is trading at $908.34 in midday trading on Tuesday, May 14. However, the stock could still be undervalued here. I discussed this in my last Barchart article on April 21, 2024, “Nvidia Stock Looks Too Cheap Here - Put Premiums are Very High and Worth Shorting.”In the article, I discussed how NVDA stock could be worth $942 per share based on its FCF and FCF margins. That was based on analysts' revenue estimates for this year and next that have since risen. Now Nvidia is on an average run rate revenue of $126.675 billion in the next 12 months, vs. $123.87 billion in the artic","collect":0,"end_time":0,"defaultTopTitle":"barchart.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0234572021.USD":"高盛美国核心股票组合Acc","IE00BMPRXR70.SGD":"Neuberger Berman 5G Connectivity A Acc SGD-H","IE00BMPRXN33.USD":"NEUBERGER BERMAN 5G CONNECTIVITY \"A\" (USD) ACC","LU0109392836.USD":"富兰克林科技股A","BK4543":"AI","BK4527":"明星科技股","BK4579":"人工智能","BK4588":"碎股","LU0175139822.USD":"AB FCP I Global Equity Blend A USD","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","BK4587":"ChatGPT概念","BK4503":"景林资产持仓","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","LU0097036916.USD":"贝莱德美国增长A2 USD","BK4180":"家用器具与特殊消费品","LU0320765059.SGD":"FTIF - Franklin US Opportunities A Acc SGD","IE00B3M56506.USD":"NEUBERGER BERMAN EMERGING MARKETS EQUITY \"A\" (USD) ACC","IE00BD6J9T35.USD":"NEUBERGER BERMAN NEXT GENERATION MOBILITY \"A\" (USD) ACC","NVDA":"英伟达","BK4581":"高盛持仓","LU0316494557.USD":"FRANKLIN GLOBAL FUNDAMENTAL STRATEGIES \"A\" ACC","LU0444971666.USD":"天利全球科技基金","LU0198837287.USD":"UBS (LUX) EQUITY SICAV - USA GROWTH \"P\" (USD) ACC","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU0289961442.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"AX\" (SGD) ACC","LU0276348264.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN\"AUP\" (USD) INC","BK4549":"软银资本持仓","LU0127658192.USD":"EASTSPRING INVESTMENTS GLOBAL TECHNOLOGY \"A\" (USD) ACC","BK4548":"巴美列捷福持仓","LU0289739343.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (SGD) ACC","IE00B7KXQ091.USD":"Janus Henderson Balanced A Inc USD","BK4529":"IDC概念","LU0466842654.USD":"HSBC ISLAMIC GLOBAL EQUITY INDEX \"A\" (USD) ACC","LU0348723411.USD":"ALLIANZ GLOBAL HI-TECH GROWTH \"A\" (USD) INC","IE00BFSS7M15.SGD":"Janus Henderson Balanced A Acc SGD-H","LU0238689110.USD":"贝莱德环球动力股票基金","LU0234570918.USD":"高盛全球核心股票组合Acc Close","BK4532":"文艺复兴科技持仓","BK4592":"伊斯兰概念","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","LU0072462426.USD":"贝莱德全球配置 A2","LU0170899867.USD":"EASTSPRING INVESTMENTS WORLD VALUE EQUITY  \"A\" (USD) ACC","LU0417517546.SGD":"Allianz US Equity Cl AT Acc SGD","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","LU0056508442.USD":"贝莱德世界科技基金A2","TUP":"特百惠","LU0080751232.USD":"富达环球多元动力基金A","LU0308772762.SGD":"Blackrock Global Allocation A2 SGD-H","IE00BJJMRY28.SGD":"Janus Henderson Balanced A Inc SGD"},"translate_title":"英伟达在下周盈利前仍然便宜——看跌溢价很高，值得做空","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TUP":1,"NVDA":1},"content_text":"Nvidia Inc (NVDA) stock still looks undervalued based on its powerful free cash flow and FCF margins. The company will release its earnings next Wednesday, May 22, for its fiscal Q1 2025 ending April 30. As a result, its put option premiums are now very high from speculators that expect NVDA to fall. That makes shorting out-of-the-money (OTM) puts attractive as an income play, especially for existing investors in the stock.\nNVDA is trading at $908.34 in midday trading on Tuesday, May 14. However, the stock could still be undervalued here. I discussed this in my last Barchart article on April 21, 2024, “Nvidia Stock Looks Too Cheap Here - Put Premiums are Very High and Worth Shorting.”\nValuing NVDA Stock\nIn the article, I discussed how NVDA stock could be worth $942 per share based on its FCF and FCF margins. That was based on analysts' revenue estimates for this year and next that have since risen. Now Nvidia is on an average run rate revenue of $126.675 billion in the next 12 months, vs. $123.87 billion in the article.\nAs a result, using an average 47.5% FCF margin forecast, its FCF could rise to $60.2 billion in the next 12 months. That would be over twice the $26.95 billion it made in FCF last fiscal year.\nUsing a 44.4x multiple (the same as a 2.25% FCF yield metric) means that NVDA stock could end up with a market value of $2.673 trillion. That is 18% higher than the stock's existing market cap of $2.269 trillion.\nIn other words, NVDA stock could still be worth 18% more, or $1,070.86 per share. Many other analysts think NVDA is undervalued as well. For example, Barchart's survey of 38 analysts has a median target price of $966.46 per share. That is still 6.5% higher than today's price. In addition, AnaChart.com, a new sell-side analyst tracking service, says that the average of 38 analysts' price targets is $1,011.67.\nThe bottom line is that if the company keeps generating strong FCF margins, the stock looks cheap here. One way to play this, especially for existing investors, is to sell short out-of-the-money (OTM) put options to gain extra income.\nSelling OTM Puts for Income\nI discussed this in my last article - where I discussed shorting the $725 strike price puts due May 10 for $21.10 in premium, three weeks away. That option expired worthless, giving the short sellers an immediate yield of 2.91% in a strike 4.86% below the spot price. Since it remained out-of-the-money until expiration, there was no obligation to buy shares at $725. \nThis kind of play benefits existing shareholders who do these plays the most. They get the upside in the stock as well as the short-sale income. It's worth doing again.\nFor example, look at the May 31 option expiration period, 17 days from now. It shows that the $880 strike price puts, 2.8% below today's price, trade for $35.10.\n\n\n\nNVDA puts expiring May 31 - Barchart - As of May 14, 2024\n\n\nThis implies that a short seller of these puts can make an immediate yield of 4% (i.e., $35.1/$880.00 = 3.99%). This also provides good downside protection to the short seller. For example, the breakeven price is $880 - $35.10, or $844.90, which is 7% below today's price.\nHowever, some investors may want to do a less risky short-sale play. The June 7 expiration period shows that the $860 strike price puts are trading for $30.75.\n\n\n\nNVDA puts expiring June 7 - Barchart - As of May 14, 2024\n\n\nThat provides an immediate yield of 3.58% (i.e., $30.75/$860) and the breakeven level is $829.25 or 8.7% below today's price.\nThe bottom line is that shorting OTM puts provides a good way to generate extra income in NVDA stock. This works well with NVDA stock since it is still undervalued. That means that even if the puts are exercised it would still be a bargain entry price for the investors who buy at the strike prices they shorted. They can hold the new shares until the stock reaches the expected target price.\n And even if not, the breakeven levels provide extra downside protection. The investor can also turn around and short OTM calls to generate extra income if they think the stock will stay level for a period. This is why shorting OTM puts in NVDA stock looks like a good income play for existing investors.More Stock Market News from Barchart \n\nIs Wall Street Bullish or Bearish on KeyCorp Stock?\nIs It Time to Buy the Dip in ASML Stock?\nBeware of Bidding Up Meme Stock Tupperware (TUP)\nWhat Are Wall Street Analysts' Target Price for Fortinet Stock?\n On the date of publication, Mark R. Hake, CFA did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"hasMoreComments":false,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}